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Experts say FX crisis repeat is unlikely

Posted November. 29, 2000 14:09,   


Despite the won¡¯s soaring exchange rate, it is unlikely that it will lead to another foreign exchange crisis. However, corporate bankruptcy might increase, as domestic firms have been facing financial trouble during the past several months.

The early-warning index for financial crisis that is announced monthly by LG Economic Research Institute (LGERI) and Dong-A Ilbo shows that the index has increased slightly to 0.53 in October from the previous month's 0.28. Still, it is relatively low level.

LGERI said that the recent rise of the exchange rate leveled off the excessively high evaluation of won against the U.S. dollar, adding that the possibility of leading to foreign exchange crisis is very low.

The early-warning index for the financial situation rose to 2.39 in October from September's 2.33 and remains at a high level. The corporate sales growth rate has slowed, and stock prices increased rapidly, thus expanding demand for funds with deterioration of the index.

LGERI speculated that the corporate financial situation might worsen further unless the financial brokerage function of domestic financial institutions is not recovered, as many companies are faced with financial difficulties.