ID :
95906
Sun, 12/20/2009 - 09:33
Auther :
Shortlink :
https://oananews.org//node/95906
The shortlink copeid
(Yearender) S. Korean currency rises against dollar amid eased financial turmoil
By Kim Soo-yeon
SEOUL, Dec. 20 (Yonhap) -- The South Korean currency rose sharply against the
U.S. dollar this year as a faster-than-expected economic recovery fueled foreign
investors' appetite for risky assets, analysts say.
They also noted that the won is widely expected to appreciate against the
greenback next year, though the pace of its ascent will be modest due to the
country's smaller current account surplus and the sluggishness of new orders
clinched by shipbuilders.
The Korean won was one of the world's worst performing currencies in 2008, as the
global credit crunch and subsequent economic downturn sparked by the collapse of
Lehman Brothers prompted offshore investors to flock to safer assets. The
currency tumbled 25.7 percent to the dollar last year alone.
It has since risen about 35 percent after hitting an 11-year low in early March
this year, as global financial markets began to stabilize.
"As the global financial turbulence eased, the local currency bounced back this
year after undergoing steep losses in 2008," said Byeon Ji-young, a currency
analyst at Woori Futures Co.
"The won's ascent against the dollar came as robust exports helped South Korea
log a current account surplus."
Analysts say the rise in the country's current account surplus and a buying spree
of local stocks by foreign investors have put upward pressure on the won, in
sharp contrast to the massive capital outflows seen in 2008.
Snapping last year's red-ink streak, Korea posted a current account surplus for
the ninth consecutive month in October due mainly to a pick-up in exports. In the
first 10 months of this year, the accumulative surplus amounted to US$37 billion.
The Bank of Korea (BOK), the central bank, predicted that the current account
surplus will reach $43 billion this year before shrinking to around $17 billion
in 2010.
Amid continued dollar inflows, South Korea's foreign exchange reserves rose to a
record $270.89 billion in November mainly because a weaker U.S. dollar boosted
the conversion value of assets in other currencies.
The country's foreign reserves declined for the eighth straight month in November
2008 as foreign exchange authorities unloaded dollar holdings to stem the won's
fall against the dollar and ease a deepening credit squeeze.
Economists say the won's gain also came as offshore investors bought local stocks
and bonds on the back of growing prospects for an economic recovery and all-time
low U.S. interest rates.
Foreign investors snapped up a net 31.6 trillion won ($27.1 billion) worth of
local stocks as of Dec. 13, a sharp turnaround from net sales of 33.6 trillion
won registered last year, according to the Korea Exchange. Offshore investors'
net buying of Seoul bonds reached 49 trillion won in the January-November period,
data compiled by the financial regulator showed.
Such massive investment in Korean securities mainly stemmed from growing signs
that the Korean economy is pulling out of its worst downturn in more than a
decade faster than had been anticipated, it said.
The South Korean economy, Asia's fourth-largest, grew 3.2 percent in the third
quarter from three months earlier, the fastest quarterly expansion in more than
seven years, thanks to improving domestic demand and brisk exports.
The government recently predicted that the Korean economy will grow 0.2 percent
this year, avoiding a yearly contraction, before jumping 5 percent next year. The
BOK said Korea's gross domestic product, the broadest measure of economic
performance, is forecast to expand 4.6 percent next year.
Analysts noted that the Korean unit is widely expected to climb further because
the dollar's weakness will likely continue into next year on expectations that
the U.S. Federal Reserve will keep its key interest rate at a record low for an
extended period of time.
"The weakness of the dollar will likely continue in 2010 as the U.S. economy
recovers gradually while other emerging markets rebound at a faster pace," said
Jun Min-kyu, an economist at Korea Investment & Securities Co., adding that the
Korean unit may trade between the 1,050 and 1,100 level next year.
But analysts say the pace of the won's ascent will not likely be too steep as the
country's current account surplus is expected to fall on rising imports, and as
new orders obtained by local shipbuilders will remain sluggish, limiting the
market's dollar supply.
"Even if the won is forecast to gain against the dollar next year, it is not
likely that the Korean currency will breach the 1,000 level, given that dollar
forward sales by shipbuilders could be limited," Byeon said.
Korean shipbuilders usually unload dollar forwards to hedge currency risks after
winning contracts when the won is widely expected to gain against the dollar. But
in the aftermath of the global economic downturn, shipbuilders have suffered from
a lack of new orders.
sooyeon@yna.co.kr
(END)
SEOUL, Dec. 20 (Yonhap) -- The South Korean currency rose sharply against the
U.S. dollar this year as a faster-than-expected economic recovery fueled foreign
investors' appetite for risky assets, analysts say.
They also noted that the won is widely expected to appreciate against the
greenback next year, though the pace of its ascent will be modest due to the
country's smaller current account surplus and the sluggishness of new orders
clinched by shipbuilders.
The Korean won was one of the world's worst performing currencies in 2008, as the
global credit crunch and subsequent economic downturn sparked by the collapse of
Lehman Brothers prompted offshore investors to flock to safer assets. The
currency tumbled 25.7 percent to the dollar last year alone.
It has since risen about 35 percent after hitting an 11-year low in early March
this year, as global financial markets began to stabilize.
"As the global financial turbulence eased, the local currency bounced back this
year after undergoing steep losses in 2008," said Byeon Ji-young, a currency
analyst at Woori Futures Co.
"The won's ascent against the dollar came as robust exports helped South Korea
log a current account surplus."
Analysts say the rise in the country's current account surplus and a buying spree
of local stocks by foreign investors have put upward pressure on the won, in
sharp contrast to the massive capital outflows seen in 2008.
Snapping last year's red-ink streak, Korea posted a current account surplus for
the ninth consecutive month in October due mainly to a pick-up in exports. In the
first 10 months of this year, the accumulative surplus amounted to US$37 billion.
The Bank of Korea (BOK), the central bank, predicted that the current account
surplus will reach $43 billion this year before shrinking to around $17 billion
in 2010.
Amid continued dollar inflows, South Korea's foreign exchange reserves rose to a
record $270.89 billion in November mainly because a weaker U.S. dollar boosted
the conversion value of assets in other currencies.
The country's foreign reserves declined for the eighth straight month in November
2008 as foreign exchange authorities unloaded dollar holdings to stem the won's
fall against the dollar and ease a deepening credit squeeze.
Economists say the won's gain also came as offshore investors bought local stocks
and bonds on the back of growing prospects for an economic recovery and all-time
low U.S. interest rates.
Foreign investors snapped up a net 31.6 trillion won ($27.1 billion) worth of
local stocks as of Dec. 13, a sharp turnaround from net sales of 33.6 trillion
won registered last year, according to the Korea Exchange. Offshore investors'
net buying of Seoul bonds reached 49 trillion won in the January-November period,
data compiled by the financial regulator showed.
Such massive investment in Korean securities mainly stemmed from growing signs
that the Korean economy is pulling out of its worst downturn in more than a
decade faster than had been anticipated, it said.
The South Korean economy, Asia's fourth-largest, grew 3.2 percent in the third
quarter from three months earlier, the fastest quarterly expansion in more than
seven years, thanks to improving domestic demand and brisk exports.
The government recently predicted that the Korean economy will grow 0.2 percent
this year, avoiding a yearly contraction, before jumping 5 percent next year. The
BOK said Korea's gross domestic product, the broadest measure of economic
performance, is forecast to expand 4.6 percent next year.
Analysts noted that the Korean unit is widely expected to climb further because
the dollar's weakness will likely continue into next year on expectations that
the U.S. Federal Reserve will keep its key interest rate at a record low for an
extended period of time.
"The weakness of the dollar will likely continue in 2010 as the U.S. economy
recovers gradually while other emerging markets rebound at a faster pace," said
Jun Min-kyu, an economist at Korea Investment & Securities Co., adding that the
Korean unit may trade between the 1,050 and 1,100 level next year.
But analysts say the pace of the won's ascent will not likely be too steep as the
country's current account surplus is expected to fall on rising imports, and as
new orders obtained by local shipbuilders will remain sluggish, limiting the
market's dollar supply.
"Even if the won is forecast to gain against the dollar next year, it is not
likely that the Korean currency will breach the 1,000 level, given that dollar
forward sales by shipbuilders could be limited," Byeon said.
Korean shipbuilders usually unload dollar forwards to hedge currency risks after
winning contracts when the won is widely expected to gain against the dollar. But
in the aftermath of the global economic downturn, shipbuilders have suffered from
a lack of new orders.
sooyeon@yna.co.kr
(END)
