Falling Exchange Rate Hurting Exports

On Monday, the won-dollar exchange rate plummeted to the 930 won range (meaning that the value of the won skyrocketed), which is the lowest point in eight and a half years. This is the result of pressure from advanced countries on Asian countries to appreciate their currencies. At the news that the rate fell below the 940 won mark, share prices declined steeply, and exporting companies, especially small and medium-sized enterprises (SMEs), are in an emergency situation.

Not only has the won-dollar exchange rate been falling since early last year but also the won-yen rate. This has strengthened the price competitiveness of Japanese goods, which have been taking an increasing share in the Korean market.

The won-dollar exchange rate closed on the Seoul foreign exchange market at 939.8 won, 8.8 won lower than the previous trading day, which was April 21. This is the lowest exchange rate since the 929.5 won figure from October 24, 1997.

Exporting companies dumped their dollars en masse in order to stop losses, breaking the supply-demand balance.

Other Asian currency values also climbed up, including the yen, as the yen-dollar exchange rate dropped by about two yen to the 115 yen range on the Tokyo market.

Meanwhile, Korean exporting companies are expected to suffer a huge blow due to their weakened price competitiveness.

On this day, KOSPI fell 20.37 points, or 1.4 percent, closing at 1,430.94 points due to the plummeting exchange rate and high oil prices. Kosdaq fell 5.79 points, or 0.83 percent, and closed at 695.70 points.

Kyung-Joon Chung Wan-Bae Lee news91@donga.com roryrery@donga.com