Aggravated Business Profitability

As US dollar has decreased rapidly, many experts have been concerned that it will shock the world economy such as EU and Japan.

Domestic research institutions have worried about a profitability downhill of Korean companies as a prospect of KRW/USD continuously has decreased.

In the New York Exchange Market as of June 24 (local time), USD/EUR once skyrocketed to USD 0.9813 and ended to USD 0.9709. EUR/USD increased by 13% over February 1.

Citi Bank changed USD/EUR from USD 0.96 to USD 1.02 after 3 months. Accordingly, the market has accepted the additional decrease of USD/EUR as an established fact.

On June 24, ￥/USD largely decreased to ￥121.72 from ￥134 in February. BLOOMBERG forecasted “￥/USD will sink below ￥120 this week” quoting the speaking of the experts on June 25.

▽Worry on USD downhill〓 US government publicly insisted ‘strong US dollar’, but seems to leave the aggravation of US dollar.

According to Wall Street Journal on June 25, US analysts said ‘the recent downhill of US dollar is normal. However, if the US dollar sharply drops, the problem will be serious”. Also, this newspaper reported “US dollar which was stable even in Asian financial crisis started to lose the trust from investors due to the recent downhill”.

Japan has worried so much about the aggravation of US dollar because the export of Japan can decrease owing to increasing the price in USD of the products. Even Europe has been worried about the aftereffects such as the decreasing exports to US and decreasing US tourists for a summer.

▽ Korea, worried about the aggravation of the company performance 〓Such as Samsung, LG and Hyundai, private research institutions forecasted that KRW/USD may drop below KRW 1200 until the end of the year. As of June 25, KRW/USD slumped to KRW 1,213 decreased by KRW 119 over the lowest price of KREW 1332 this year.

According to the report of Samsung Economic Research Institution, which forecasted that the Korean Won is under-evaluated in the beginning of the year, decreased the annual average exchange prospect to KRW 1,250 from 1,280 as the US economy is not good as expected. Also, it added ‘Korean Won will be within about KRW 1,200 for the fourth quarter (October ~ December). Gwen Sunwu, the chief researcher of Samsung Economic Research Institution warned ‘last year, the growth of business performance was low due to an unexpected exchange and low interest. However, this year, the business performance is good but the situations are opposed”.

konihong@donga.com