Won-Yen Exchange Rate Falls to 770

The exchange rate of the won against Japanese yen has dropped to 770 won range per 100 yen (won appreciation) for the first time since the 1997 financial crisis.

Because of the steep fall of the won-yen exchange rate, the profitability of Korea’s export industries that compete with Japanese ones in the world market, such as shipbuilding, electronics and automakers, are likely to worsen.

On January 3, in the Seoul foreign exchange market, the won-yen exchange rate dropped for the third consecutive day on trading-day basis by 0.63 won from the previous day, closing at 779.55 won per 100 yen.

This is the first time the won-yen exchange rate has fallen to the 770 won level in nine years and two months since October 27, 1997, right before the nation was hit by the financial crisis, when the rate stood at 771.44 won per 100 yen.

The foreign exchange market experts has explained that the steep fall in the won-yen exchange rate is attributable to the recent situation where the won has continued to be relatively stronger than the yen against the dollar in the international exchange market.

Although some forecast yet another fall in the won-yen exchange rate, others are raising different opinions. They expect no further drop in the won-yen exchange rate based on the analysis that the Japanese central bank is likely to raise the interest rate soon, since the nation has been enjoying a prolonged economic boom.

Researcher Lee Yoon-suk of the Korea Institute of Finance said, “A stronger yen can be possible soon as the Japanese economy is expanding now.”

Meanwhile, the won-dollar exchange rate closed at 926.0 won, up 0.5 won from the previous day. That seems to have caused by the declined dollar supply in the market as many export companies already exchanged much of the dollars they received to the won in the previous day.

jinhup@donga.com