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mrsquirrel
Joined: 13 Dec 2006
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 Posted: Wed Mar 26, 2008 3:57 am Post subject: Won weakens vs dollar finance ministry screws you all |
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SKorean won weakens vs dollar as finance ministry seeks export boost - UPDATE
SEOUL (Thomson Financial) - The South Korean currency, the won, closed sharply lower against the US dollar on Wednesday after the finance ministry sent a strong signal that it favored a weaker won to rein in a widening trade deficit and boost exports.
The won closed at 986.8 to the dollar on Wednesday, compared to the previous close of 976.3.
The won dipped today after local news provider edaily quoted South Korea's deputy finance minister Choi Joong-Kyung as expressing concern about the won's surge against the dollar, saying small exporters with limited forex hedging capability may face some liquidity pinch.
'A tumbling won is not desirable but its rapid surge is much more undesirable,' Choi was quoted as saying at a recent meeting with heads of private think-tanks.
Choi made the statement after the won gained substantial strength against the dollar on Tuesday, sending the dollar down more than 20 won, marking its biggest drop against the South Korean currency in seven years.
BoK's stance
The won on Tuesday received unusual support from the central bank after Bank of Korea governor Lee Sung-Tae said that the dollar's recent jump was abnormal and that it would weaken over time.
During the dollar's 'abnormal rise' against the South Korean currency, the won suffered its longest-ever losing streak, with the US unit climbing above 1,000 won for the first time in over two years on the view that the dollar was a safer bet compared to the won amid the ongoing credit crisis.
A combination of factors such as foreign investor selling of South Korean stocks, a widening trade deficit, and investment trusts' buying of dollars to cover their losses on previous forex hedging positions had pressured the local currency.
Central bank governor Lee, at the same time, warned that the US economic outlook is not so bright and that a further rise in the dollar may be limited.
'I believe the dollar has been ... testing how far it can go up against the won in the short run. But given that the US economic outlook is not good, the long-term outlook is for a weak dollar,' Lee recently said after his speech before business managers, Internet news service edaily reported.
Traders also blamed the won's losses Wednesday to a drop in the amount of shares foreign investors bought from South Korea's stock market following downbeat readings on consumer confidence and housing prices in the US.
In addition to the unusually strong verbal intervention, the government even moved out to purchase about 500-700 million US dollars from the currency market, prompting institutional investors to follow suit.
Foreign investors were recorded as net buyers of shares worth 101.4 billion won today, compared to 450 billion won on Tuesday.
On the stock exchange, the benchmark KOSPI index closed up 4.74 points or 0.3 percent at 1,679.67, after trading between 1,670.31 and 1,681.91.
The major US indexes closed mixed overnight after data showed consumer confidence sank to a five-year low in March, while home prices fell 11.4 percent in January, their worst performance since data was first collected in 1987.
Mixed signals
'The financial authorities are giving out mixed signals, creating great confusion and adding to the volatility,' said Jeon Seung-Ji, an analyst at Samsung Futures.
As long as the central bank wants a strong won to defend its inflation target while the finance ministry favors a weak won to support export, the forex market will remain unstable, she said.
'The forex market is now a battlefield between the two top economic policy makers struggling to win over each other. It's really a hard game, making predictions more difficult,' she said.
The market may suffer another turbulence on Friday when the nation's current account data for February is released.
For January, the nation posted a current account deficit of 2.6 billion US dollars, the largest since January 1997 when the shortfall hit 3.13 billion dollars. The January 2008 reading compared to a deficit of 813.8 million dollars in December 2007.
'February may have seen an even greater deficit and if the actual figures turn out to be worse than expected, then that will hit the forex market hard,' Jeon said.
The central bank has repeatedly said that the current account will likely stay in deficit at least until March, blaming high oil prices and foreign investors' dividend remittances.
According to the latest official data, the trade balance, a key component of the current account, stood at a deficit of 4.8 billion US dollars during the first 20 days of March, much larger than February's trade deficit of 1.2 billion US dollars.
[email protected]
es/nt --- By Seo Eun-Kyung --- es/ms/es/nt/nt |
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bogey666
Joined: 17 Mar 2008
Location: Korea, the ass free zone
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| Posted: Wed Mar 26, 2008 5:12 am Post subject: Re: Won weakens vs dollar finance ministry screws you all |
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SHARPLY lower?
as in 1%?
puhleeeeaze.
that's nothing in the won.
better grin and bear it and just calculate your exchange rate at something around 1000 to 1. The days of 930 are gone short/intermediate term methinks.
besides. let's see.. if I am the Finance Ministry or Central Bank of a foreign country whose main economic cog are exports.. will I worry about the exchange rate for foreigners working in Korea or will I focus on ensuring that my country's exports can be sold on a slugglish global markets by making them cheaper, by devaluing my currency?
I'll take option B. |
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jdog2050
Joined: 17 Dec 2006
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| Posted: Wed Mar 26, 2008 3:02 pm Post subject: Re: Won weakens vs dollar finance ministry screws you all |
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| bogey666 wrote: |
SHARPLY lower?
as in 1%?
puhleeeeaze.
that's nothing in the won.
better grin and bear it and just calculate your exchange rate at something around 1000 to 1. The days of 930 are gone short/intermediate term methinks.
besides. let's see.. if I am the Finance Ministry or Central Bank of a foreign country whose main economic cog are exports.. will I worry about the exchange rate for foreigners working in Korea or will I focus on ensuring that my country's exports can be sold on a slugglish global markets by making them cheaper, by devaluing my currency?
I'll take option B. |
This exactly. Korea has been thinking about devaluing their currency for the past year, and this might be the impetus to do so. A Won that's been fluctuating between 980 and 1020 is not a good sign honestly. |
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lucas_p
Joined: 17 Sep 2007
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| Posted: Wed Mar 26, 2008 4:40 pm Post subject: |
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You guys are right -- this is what the government wants for healthier exporting.
For us Americans that are here, it just means it is worth even less to be here. Too bad America is even worse and going down -- we have no place to go now  |
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Dukey77777
Joined: 28 Jun 2007
Location: Chungcheongbuk-do
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| Posted: Wed Mar 26, 2008 5:41 pm Post subject: |
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| True, but it's been under 1000 for the past 3 days. You don't see it dropping further? I think it could go 10-20 more down... |
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22tea77
Joined: 22 Oct 2007
Location: United States
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| Posted: Wed Mar 26, 2008 6:35 pm Post subject: |
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But the scarey thing here is just how quickly it moved last week (or the week before) from about 930 to as high as 1026!! For us Americans, that was nearly a 10% pay cut!
If there is no inflation here, life in Korea will remain basically the same, but for those of us that have bills back home, there will be less money left over for KimChi, Hite, and other quality of life items! |
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air76
Joined: 13 Nov 2007
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| Posted: Wed Mar 26, 2008 7:04 pm Post subject: |
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I think that people are freaking out without keeping things in perspective. Historically a 930 won/dollar exchange rate is pretty much the strongest the won has ever been against the dollar, bumping to 1000/dollar is not a huge slide but instead more of a normalization. When I first came to Korea in 2004 the rate was more nearly 1200 won/dollar, so the current exchange rate is still a good 15% "better" for transfering money back to the US than it was just a few years ago.
Don't get me wrong, I'd like to make more money like everyone else, but currency fluctuations are just part of the game when you work in one country and send a good portion of your earnings to another. Sometimes you win and sometimes you lose.
I think that people are also losing sight of how good they still have it here. For one thing the drop in the won has virtually no effect on your rent-free ridiculously low cost of living in Korea, and if you can now only send $1400/month home instead of $1500/month then boo-hoo. Try to do anywhere close to that elsewhere and you'll gladly come back. |
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22tea77
Joined: 22 Oct 2007
Location: United States
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| Posted: Wed Mar 26, 2008 9:57 pm Post subject: |
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Air76....I am a newbie, and during the entire application process, the won was around 920-930, and completely stable.
Its not the jump to 1026 that bothers me, but more the fact that it happenned during a time when most other world currencies were gaining strength against the dollar.
You are completely correct in saying that currency exchange fluctuations are part of the job...something that you have to deal with....taking the bad with the good. Guess I was lulled into a sense of "stability" when I looked at a one year chart of the won/dollar exchange. Had no idea it was 1200 as recently as 2004. |
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mrsquirrel
Joined: 13 Dec 2006
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| Posted: Wed Mar 26, 2008 10:06 pm Post subject: |
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It was pointed out to me last week that I had missed the 2280 to the pound in 2004. I must have just missed it.
I was fairly happy yesterday with 1800 to the pound when I wired back home.
Considering the time before that it was at 1950
Sadly last year it was around 1600.
Ah well.
Have to see what happens next.
Might just buy lots of kimchi and keep it for a while. it never goes off. |
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JustJohn
Joined: 18 Oct 2007
Location: Your computer screen
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| Posted: Wed Mar 26, 2008 11:32 pm Post subject: |
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Investing in kimchi? If that's not thinking like a Korean I don't know what is.  |
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bogey666
Joined: 17 Mar 2008
Location: Korea, the ass free zone
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| Posted: Thu Mar 27, 2008 2:58 am Post subject: |
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| 22tea77 wrote: |
Air76....I am a newbie, and during the entire application process, the won was around 920-930, and completely stable.
Its not the jump to 1026 that bothers me, but more the fact that it happenned during a time when most other world currencies were gaining strength against the dollar.
You are completely correct in saying that currency exchange fluctuations are part of the job...something that you have to deal with....taking the bad with the good. Guess I was lulled into a sense of "stability" when I looked at a one year chart of the won/dollar exchange. Had no idea it was 1200 as recently as 2004. |
that's because the won isn't other currencies.
it's the won.
Korea as a huge exporter to the US will suffer if the US goes into an economic slowdown. |
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