SEOUL: South Korea's won surged Wednesday to its highest level since before the global financial crisis, sparking concern the stronger currency might undermine the export-reliant economy.
The won ended at 1,041.40 to the dollar, up 10.80 won from the previous session and close to the 1,039.80 per dollar reached on August 14, 2008.
The country's continuously strong trade surplus and a recent global weakening of the greenback combined to bolster the won, analysts said.
"Many people believed the won would not strengthen beyond the 1,050 won per dollar in the forseeable future", economist Park Sungwook of the Korea Institute of Finance told AFP.
"But once the won rose past that level, a very large amount of orders to buy the won came in."
Finance Minister Hyun Oh-Seok appeared to hint Wednesday that Seoul would not intervene to stop the rise.
He said Seoul was paying more attention to the won's "volatility rather than the exchange rate itself", adding fuel to the market's frenzy to buy the won.
Analysts said the sudden rise in the won's value could undermine Asia's fourth largest economy by making its exports more expensive compared with competitors.
"The strengthening of the won sparked concerns that the price-competitiveness of major exporters might be hurt," said Kim Dae-Joon, analyst at LIG Investment and Securities.
The stock prices of the country's main exporters -- Samsung Electronics and Hyundai Motor -- fell 1.65 percent and 2.01 percent, respectively, on Wednesday, as the stronger won sparked heavy profit-taking.
Hyundai's smaller affiliate Kia shed 2.47 percent, while electronics giant LG Electronics lost 1.3 percent.
Suh Sung-Moon of Korea Investment and Securities said if the won gains 10 won per dollar, Hyundai Motor's annual operating profit would be reduced by 80 billion won (76.8 million dollars) and Kia's would be cut by 50 billion won.
"However, the impact from the won's appreciation would not be so great" as in the past, the analyst said, noting Hyundai produces 62 percent of its cars at overseas plants and Kia Motors 44 percent.
The finance minister also said the impact of the strong won was "not as big as before".
"Companies are more immune to currency swings as we have free trade agreements with more countries than before," Hyun said.
Comments
Comments are closed for this article.