Korean Job Discussion Forums

[swoodman]

South Korea has rasied interest rates - I know nothing much about the economy but in the Uk Its believed a raised interest rate would lead to a stronger pound - will this korean rise lead to a stronger won? Or is this wishful thinking?

http://www.bbc.co.uk/news/business-12179244

[Vagabundo]

[s10czar]

Raising interest rates is also a way to stem inflation.

In a healthy market, slowly rising rates are a good thing for both the currency and the economy. This market is not healthy however. My take is that the ROK government must scared sh**-less about inflation in food and other commodities.

It's also interesting to note that China and Japan just took joint action to bail-out Europe.

[Vagabundo]

[big_fella1]

Korea tends to be a hot money(risk capital) destination so I think it's unlikely that the rise will have much effect on the KRW. Also Korea's cash rate is 2.75% whereas Australia's is 4.75%.

I think this interest rate hike was a mistake, as the inflation we are seeing in the ROK at the moment is due to bad weather increasing food prices and not due to excessive consumption.

I love economics, you can be consistently wrong and still keep your job.

[Chris.Quigley]

All other things being equal, yes higher interest rates equal a more valuable currency. It makes government bonds more attractive to both foreign and domestic investors which means less money leaving the country and more money coming in, thus a higher currency. (Supply and Demand)

I disagree with there being a "loose" connection. There is a direct connection between the two. However, there are many influences other than interest rates on the value of a currency. War with the North, economic growth, the ideology of the government. Bottom line is it's a speculative market!

As has been said, the Korean government may intervene in the currency markets in order to try and slow or prevent the rise of the won. So, just because the interest rates have increased, does not mean there will be an increase in the won.

***Disclaimer*** This is an opinion. This is not investment advice! You should contact a financial professional.

[s10czar]

"***Disclaimer*** This is an opinion. This is not investment advice! You should contact a financial professional."

Jesus, you sound like you work for T. Rowe Price.

I should know because I do

[Vagabundo]

[Ice Tea]

The Bank of Korea raised interest rates to try and control inflation, but it won't work. Why? The rise in food prices is a global issue and Korea is a net importer of food. If they really wanted to control inflation they would allow the won to rise. Raising the interest rate would help the won rise, but the Korean government will stop its rise by buying US dollar reserves. The establishment exists to serve the needs of the Chaebol only. So in the end the only thing that's going to change is the government will accrue more debt to finance their dollar buying, meaning we lose twice. Prices will continue to rise and our government will increase their debt.

[tideout]