Korean Job Discussion Forums

[atwood]

It appears they were just waiting for G20 to finish before pushing the won back up--from 1110 to 1142 in five days is a big jump. I guess it could be attributable to higher interest rates, but aren't higher interest rates a sign the economy is doing well?

[Lee Myung Bak]

Yeah the G20 solved nothing about setting guidelines with currencies. Most countries were ticked with China for manipulating the Yuan, but a week before the G20 the US fed announced QE2, which will inject a ton of US dollars into the market. Other countries don't want the market to be over-flooded with US dollars. So the anger shifted towards the US and no agreements were set.

Yeah, higher interest rates show a sign of a stronger economy. There is also a looming issue with inflation, so the authorities tend to favor raising interest rates to curb inflation.

Raising interest rates usually make a currency stronger in the long run. So the BOK has decided to intervene in the market to weaken the currency. Also the European debt crisis has re-emerged as a worry, which tends to hurt riskier currencies, like the won. The combination made the loss so drastic in a few days. In my opinion the fundamentals for the currency are too strong for it to go much higher than 1150 in the short term, and will sluggishly fall back down as the BOK will step in to limit any big one day gains.

Its too bad, there was a shot of breaking the 1100 barrier, looks nearly impossible of happening any time soon now.

[Zutronius]

Drats. I'm sitting on 7 million Won I was hoping to send home soon.

[jondepoer]

This is depressing. Everything I heard leading up to the summit seemed to indicate that the won was undervalued, and that the "agreements" reached at the summit would cause it strengthen.

Oh well, I guess I'll keep the old KEB account open, and hope that this banana republic stops playing with its exchange rate.

[atwood]

[itistime]

OVERLY opp is an understatement.
I xfered about 4 mil 2 days before the 20.

Why would you think the won would continue to strengthen?
Wasn't it written in the stars that the U.S. buying billions of Tbonds
would kill most currencies around the world...in the short term?
And, I'm a complete novice.

[Vagabundo]

[Vagabundo]

btw.. the reason for the won's fall is simple. Massive foreign selling of Korean stocks as the market corrected its huge upmove over the last several months.

The reason the upmove didn't send the won much higher over the last several months is because the Korean govt has been interfering in the currency markets by selling won, and otherwise passing new trading restrictions, jawboning the won down, etc etc etc.

[tfunk]

[shostahoosier]

I'm definitely a novice...and I was just under the impression that the won strengthened (slightly) and held steady during the G20 conference because Korean didnt want to be called out directly on manipulating their currency while they were in the world's spotlight.

I sent almost all of my money home. Unfortunately, my pay date this month was just AFTER the G20 conference....so it will stay in my bank account until the next time the won gets relatively decent.

[atwood]

[nathanrutledge]

http://joongangdaily.joins.com/article/view.asp?aid=2928591
http://joongangdaily.joins.com/article/view.asp?aid=2928586
Macroeconomics by Gregory Mankiw - read it.

The Korean government does not manipulate it's currency any more than other countries do. China DOES manipulate its currency by keeping the value of it artificially low. This is possible in China because of the immense size and power of the government and its involvement in every facet of the economy. No other country is in the same position.

The US and Korea can and do toy with their currency through open market operations. However, in the US, the interest rate is zero, so they cannot adjust it any lower to stimulate spending. Korea is a bit better off, but because it relies so much on foreign trade and the dollar, they buy and sell dollars on the open market to affect the value of the won. Too bad for them that last year they ran out of money in the fund to do this.

They want to keep the won weak to encourage exports. They are also trying to combat inflation because prices on basic goods are rising. They also have to deal with the US weakening the dollar. All of these things are happening simultaneously, not in a vacuum. You cannot say that one thing or another is happening because of ONE thing; it's all relevant and when you have two governments with two policies and two currencies competing, you cannot chart the long term path of the value of one currency or another. It's all relevant and it's all over the place.

[Vagabundo]

oh, I'd say the proof is fairly obvious that recently the Korean won rate has been more manipulated than most.

You also forget the little manipulation in Dec of 2008, when the Korean govt massively bought won to strengthen it and bring it from 1350 to 1250 on Dec 31. Why? because many of the derivatives contracts that Cheobols bought were bets the rate would stay between 900 and 1300 (or thereabouts) and were expiring on Dec 31.

of course the rate went to 1600 soon thereafter.

if China is depressing its currency so much, then WHY is the Korean toilet paper of a currency still worth about 40% less against the yuan than it was in 2007?

against Chinese yuan

1/1/07 - 118.98 won per 1 rmb
1/1/08 - 129.23 won per 1 rmb
1/1/09 - 186.09 won per 1 rmb
1/1/10 - 170.45 won per 1 rmb
11/19/10 - 170.45 won per 1 rmb

how should the Japanese keiretsus feel about this table?

1/1/2007 - 7.81 won per 1 yen
1/1/2008 - 8.45 won per 1 yen
1/1/2009 - 13.95 won per yen
1/1/2010 - 12.51 won per yen
11/19/2010 - 13.58 won per yen

how about Thailand, another export country Korea competes against?

1/1/2007 - 26.23 won per 1 baht
1/1/2008 - 31.85 won per 1 baht
1/1/2009 - 36.58 won per 1 baht
1/1/2010 - 34.90 won per 1 baht
11/19/2010 - 37.80 won per 1 baht

the won has hit its CRAPPIEST levels against the Thai baht.

I can post many many more.

The ddong won is one of the crappiest currencies in the world, which is just the way the govt likes it and wants it.

It was funny to hear the Koreans get huffy puffy and whine when the Japanese Finance Minister actually called them out on their crap currency manipulations last month.

[atwood]

[nathanrutledge]

Define "manipulating." EVERY country buys and sells bonds on the open market in order to inject or remove currency from circulation. That's nothing new, everyone does it and has been doing it since central banking began. The complaint with the Chinese is that they do MORE than that. By virtue of controlling the entire banking system, they can and do sell the yuan ONLY at the level they want to. They are holding the value of the yuan artificially low.

If they let it float, they could still play with the level of currency in the market, but they could not control it the way they do now.

The current policies around the world is a race to the bottom, to see who can devalue their currency the most. Everyone complained at the G20 that the US was devaluing, and Obama said "GFyourself" so they are all trying to beat the US to the bottom. The first one lowest wins (taking the smallest hit from the devaluations, having the cheapest currency to encourage exports). So it's not accurate to say Korea "manipulates it more than most." They engage in Open Market Operations (OMO) just like everyone else.

The situation in December of 2008 was NOT buying won, it was selling dollars. The Korean government spent its ENTIRE surplus of US dollars in an effort to stop the dollar from appreciating. There was a whole series of articles in the papers about it. I'll find them and post them if you find and post your conspiracy theory evidence.

The won is worth less now versus other currencies because of OMO. The interest rates are too low. The effect is locals are spending more than saving, and exports are cheap. During the recession, it was the governments stated policy to keep the won weak for exports. Again, every country does this and is currently attempting to do.

What's really funny is not the Koreans and Japanese, but the Americans who complain about the week won while our government is screwing the hell out of every bondholder in the world by destroying the dollar. Hypocrisy at it's best.