S. Korean won seen to gain more to dollar

By Park Bo-ram
SEOUL, Aug. 7 (Yonhap) -- The South Korean currency is expected to continue its
ascent against the U.S. dollar in the second half of the year on increasing trade
surpluses and more inflows of foreign stock funds, a state-run lender said
Friday.

The local currency will likely average 1,180 won to the dollar in the
July-December period and rise as high as 1,150 won in the fourth quarter, the
Korea Development Bank (KDB) said in a report.
Since plummeting to 1,570.3 won in early March, the local currency soared nearly
28 percent to close at 1,222.5 won on Thursday, bolstered mainly by the country's
swelling trade surplus.
KDB noted the won's second-half strength will be fueled by growing trade
surpluses, a rise in dollar borrowing by banks and surging inflows of foreign
stock investment funds.
The country is likely to record a trade surplus of nearly US$10 billion for the
second half, the policy lender predicted. Korea's first-half trade surplus hit
$21.6 billion.
In the first seven months of this year, foreign investors scooped up a net 16
trillion won ($13 billion) worth of local stocks.
"A gradual downtrend in global risk-averse sentiment is expected to lead to more
capital inflows into emerging markets in coming months, including South Korea,"
said Park Yong-ha, a KDB official.
With the local currency forecast to appreciate against the greenback, analysts
voice concern that a stronger won may deal a blow to exporters as it usually
makes South Korean products more expensive in overseas markets.
"Exporters may have to face a sharp drop in overseas shipments in local currency
terms," said Yoon Chang-yong, an analyst at IBK Securities Co. "The stronger won
will inevitably erode their price competitiveness."
Exports are the backbone of Asia's fourth-largest economy. Bolstered by resilient
exports and stimulus measures, the economy expanded 2.3 percent in the April-June
period from three months earlier, the strongest quarterly gain in more than five
years.
pbr@yna.co.kr
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