Domestic and Foreign Financial Markets Hit Hard

Acceleration of the weakening of yen due to the unstable Japanese economy and the economic crisis of Argentina are hitting the domestic financial market hard.

The exchange rate of won against dollar has soared by 20 won, and the worldwide stock prices are falling together, thus, it has created further anxiety for the world economy including the Korean economy. At the foreign exchange markets in Seoul Friday, the exchange rate of won against dollar soared to 1314.2 won, up 14 won from the previous day, and was closed at 1308.9 won. The exchange rate of won against dollar went up above 1300 won on Thursday in two months, as it soared by 8 won.

This is because the exchange rate of yen against dollar rose to 129.53 yen, and because foreigners bought dollars from the Non-deliverable Forward (NDF) following the resignation of the Argentine President. That is, having been concerned about the loss from foreign exchange due to the rise of exchange rate of won against dollar, foreigners bought dollars ahead. New York`s NDF closed at 1310 won in the previous day.

Predominant outlook in the market is that Japan tries to recover its worst economy through the weakening yen as the last resort, and that the U.S. would allow the weakening yen up to 135 yen per U.S. dollar. Thus, `one dollar equaling to 130 yen` is anticipated to take place soon.

If this takes place, companies that manufacture goods by importing raw materials or sell the finished products by importing them will suffer great damage, although domestic export companies can gain price competitiveness. Especially, general trading companies, oil companies, aviation companies, and maritime trading companies that have high-volume trading in dollar will be heavily damaged.

Korea Composite Stock Price Index closed at 644.71, down 19.8 points due to the sales of foreigners and investors. Kosdaq closed at 68.43, down 1.41 points. Foreign investors who were concerned about the weakening yen as well as weakening won along with the downfall of the U.S. stock prices incited the fall of stock prices by selling stocks amounting to 72.7 billion won. Prior to this, Dow fell below 10,000 and Nasdaq fell below 2,000 due to the weakening Japanese yen and the economic crisis in Argentina on Thursday. Japan`s Nikkei closed at 10,335.45 yen, down 99.07 points. Stock prices in Taiwan and Hong Kong were weak as well.

Chan-Sun Hong nirvana1@donga.com