Korean won forecast to rise fast against U.S. dollar

SEOUL, July 31 (Yonhap) -- The South Korean currency is expected to rise above the 1,000 won level against the U.S. dollar within this year amid the greenback's weakness stemming from the U.S. government debt crisis, market watchers said Sunday. The won's expected appreciation is feared to erode exporters' profitability and put a damper on South Korea's exports by making them more expensive in overseas markets. South Korea, Asia's fourth-largest economy, relies on exports for more than 50 percent of its economic growth. Analysts said there is a possibility that the Korean currency will appreciate above the 1,000 won mark within this year as U.S. politicians remain split over a debt-limit hike with the Aug. 2 deadline looming. "The local currency could gain to the 1,000 won level against the greenback by the end of the year," said Huh In, an international finance analyst at the state-run Korea Institute for International Economic Policy (KIEP). "There is even a possibility that the Korean currency will likely rise even higher." The local currency closed at 1,054.5 won to the greenback, down 2.8 won from Thursday's close, as investors shunned risky assets. However, the South Korean won has appreciated about 8 percent to the dollar since January. Hyundai Research Institute, a private economic think tank, offered a similar outlook. "The local currency is expected to climb to the 1,020-1,030 won range to the greenback in the second half," said Lim Hee-jeong, a researcher at the institute. "But we can't rule out the possibility that it could rise above the 1,000 won level." Nomura Securities Co. predicted the Korean currency to appreciate to the 1,020 won mark to the dollar in the fourth quarter of this year before rising as high as an average of 960 won next year. With the Korean currency widely expected to gain strength against the dollar, foreign investors are snapping up South Korean government and corporate bonds, a brokerage house said. As of Thursday, foreign holdings of listed and unlisted bonds reached a record 86.6 trillion won (US$82.2 billion), with overseas investors buying more than 3 trillion won worth of debts over the past month alone, according to Daewoo Securities Co.