Gov`t keen on weakening of Korean won, Japanese yen

The value of the Korean won has begun to fall sharply in the foreign exchange market amid the growing concerns over the competitiveness of the Korean economy due to the weak Japanese yen. In other words, the won began to move in the same direction with the yen. The Korean government is said to be keen on the coupling of the won and the yen, while maintaining the current trend to respond to the weak yen.

“The value of the Korean won against the dollar has been falling for the recent few days in the wake of the weak yen globally,” a government source said on Monday, adding, “We believe it is reasonable (in terms of the market principle) and desirable that the weak yen is leading to the weak won.” As the value of the Korean won is reflected to the Korean economy hit by the weak yen, the government expects that Korean exporters will be price-competitive again.

The won-dollar exchange closed at 1,111.7 won per dollar on Monday, up by 5.6 won from last Friday. It rose three consecutive trading days since last Wednesday, a surge of 25.2 won.

The value of the won plummeted these days as a result of the flight of foreign investors’ funds from the Korean market out of the concern that the weak yen could hit Korean exporters. In addition, the weak Korean won was further intensified Monday by the analysis that the G7 countries tolerated Japan’s weak yen policy over the weekend. The yen-dollar exchange surpassed 102 yen per dollar for the first time since October 2008.

“The won-yen exchange rate has been stable in the range of 1,090 won per 100 yen since last week,” An FX market participant said. “Some expects that if the won-yen exchange rate goes up again, the government could immediately intervene in the market.”