1329 Won Per Dollar… Sharp Rise of Oil Prices

The exchange rate of yen against dollar once reached 132 yen per dollar, and the exchange rate of won against dollar soared to 1330 won.

While entrusting the exchange rates of yen against dollar and that of won against dollar to the market until yen against dollar marks 135 yen, and won against dollar marks 1350 won, the government decided to be actively involved in the foreign exchange market and to stabilize the exchange rates if the rates go up beyond those rates.

It is concerning that the Korean economy and the world economy will shrunk more since the international oil prices are sharply increasing and the Argentine crisis is likely to become a long-term crisis.

The exchange rate of yen against dollar soared to 132.05 yen per dollar in the Tokyo foreign exchange market yesterday around 3:30 pm. This was followed by the director of the Japanese Ministry of Finance Kuroda Haruhiko`s statement that "the exchange rate of yen against dollar reflects the fundamental condition of Japan." and by the purchase of dollar and the sale of yen to reduce the loss created by the exchange rate when yen marked above 131.5 yen per dollar.

As the weak yen rapidly progresses, people began to voice concerns in Japan. For instance, the president of the Economic Organization Association Imai Takashi said yesterday, "The rapid devaluation of yen is led to the devaluation of credit including the national bonds, and it also negatively influences on the management of company."

The exchange rate of won against dollar rose to 1331 won in the Seoul foreign exchange market, and closed at 1329.1 won, up 11.1 won, which is the record high in 8 months since April 10th this year. The exchange rate of won against yen maintained mark of 1009 won per 100 yen.

Foreign exchange experts forecast that the exchange rate of yen against dollar will rise to 135 yen per dollar, and that of won against dollar will soar to 1350 won per dollar.

In relation to this, an official of the Ministry of Finance and Economy said that "the government will entrust the foreign exchange market until the exchange rate of yen against dollar reaches 135 yen per dollar and will leave the exchange rate of won against dollar up till 1359 won mark. If the rates go up beyond those rates, the government will be involved in the market considering that part of the foreign stock funds will flow out and the company`s loss created by the exchange rate will increase at the annual settlement term."

Meanwhile, as the OPEC`s decision to reduce the production of oil becomes certain yesterday, the international oil was traded at the prices, down 1.37-1.69 dollar per barrel. The price of the Dubai produced oil, which Korea imports great amount, was 19.55 dollar per barrel, up 1.37 dollar.

The Saudi Arabian Minister of Oil Ali Al Naimi said, "The OPEC member countries will announce the reduction of 1.5 million barrel at an extraordinary general meeting in Cairo. The oil prices will be recovered to 20 to 25 dollar per barrel based on 2 million barrel per day including the non-OPEC countries` reduced amount of oil."

Young-Ee Lee hcs@donga.com