Korean Job Discussion Forums

[lifeinkorea]

http://www.koreatimes.co.kr/www/news/biz/2009/05/123_44710.html

[Ya-ta Boy]

I wish the gov't would butt out and let the Won improve, but the reason they don't want a strong Won is that it makes Korean products more expensive overseas, losing the advantage of cheaper prices.

[poet13]

I think the simplest explanation is that if the Won is too strong, it will make Korean exports too expensive. The world economy is still very troubled, and people are in general, more in a hoarding rather than spending state of mind. It doesn't take much to convince people right now that they don't absolutely need that piece of Korean electronic.

[coralreefer_1]

[Juregen]

What most of you don't realize is that Korea is an export country and most of its economic success is due to production.

Due to the credit crunch crisis, a lot of countries are using les then 50% of their production capacity (Economics of Scale ...).

This means 1. less people working 2.higher unit cost 3. less margin and so on and so forth.

That is why the Korean government will focus on keeping itself competitive by keeping the value of the won low. It is a classic "beg-thy-neighbor' scenario.

[crossmr]

Canada does this too. When the Canadian dollar was sitting at $1.10 US last year, all the manufacturers were whining non-stop about how they needed government help. The 35 million consumers told them to go *beep* themselves because we were tired of being so screwed at the register. $6.99 US/$10.99CAD for a paperback. I'm sure they're dancing now that the dollar has tanked again.

[mayorgc]

Juregen, it doesn't take a genius to realize that Korea is an export country.

btw, I think it's "Economies of scale".

[Jammer113]

Well, one reason is definitely that Korea has been hugely helped in this economic environment by being able to export so cheaply. As long as import costs are cheap for things like oil and steel, which they currently are, Korea can afford to keep their won low.

Another thing is that businesses don't want wild gyrations in the won. Businesses are built on stability, and it is hard to invest in any sort of business when you don't know what the won will do over the next six months.

Also, the government burned a lot of money last year slowing the descent of the won, maybe they can make some of that back, now.

[Jane]

Yes the above posters are right.

A bit more to add: Export-driven countries, particularly those in Asia, are finding it difficult lately to keep growth positive, as the US is a main buyer of Korean goods. These days, US consumers are not really buying 'luxury items' like electronic goods and cars, so Korea wants to keep the won low vis-a-vis the USD as much as possible to stimulate buying from the US side.

Second, price stability is one of the most important goals for any country, as it drives foreign investment and exports. Furthermore, Korea wants to have an attractive finance market, and to do that, they have to stabilize the won.

[Rusty Shackleford]

The Korean Fed does actively manipulate the won, but they aren't actually that successful. The amount of won reserves (buying foreign currency) they put onto the exchange market, is really only a drop in the bucket. Traders generally tend to buy up all the cheap won fairly fast, so the effect is short term at best.

Govt manipulation of any market always fails.

[Juregen]

[lithium]

[weatherman]

The strength of the won is an indication of the health of the overall korean ecomomy. The weak rates in truth helped the economy greatly, and the government is loath to have an exchange rate that threatens exports. I'm sure companies are buying raw materials on 6 month or longer contracts to lock down the value of the stronger won right now.

[michaelambling]

[NCdan]

Agile guitars must remain dirt cheap. The won must not go up.