“EUR 1 〓 USD 1”, Opportunity of Europe Exports

As the EUR has sharply increased, it has affected the Korea economy steadily..

In the after noon, July 2 (Tokyo and Hong Kong market), EUR 1 was USD 0.9845. However, experts forecasted that EUR 1.00 reached to USD 0.9988 in the New York Foreign Market, on June 28 and so it will break the support line of USD 1.00.

Many experts said that the recent bull market of EUR was a reaction of slack of US dollar, not a favorable trend of Europe market. It is because of the slow recovery of US economy and decreased attraction of S capital market due to unfavorable factors such as Enron incident and WorldCom’s accounting irregularity.

Gim, Dong-Wan, team leader of Korea Center for International finance said “USD 1 〓 EUR 1. It is a matter of question. International financial market concentrates on how the bullish tendency of EUR will be continued.”

Choi, Jong-Gu, official of the Minister of Finance and Economy described “The note and coin of EUR has been commonly used from January and became popular. As the currency authority of Europe judges the value of EUR as a measure of pride, its increase will be continued for the time being”.

The popularity of EUR became visible in the bond-issuing amount. Nikkei BP, Japan reported that EUR-indication bond issuing amount of the second quarter (April ~ June) was 47% of total bonds-issuing amounts, increased by 6% over the bond-issuing amounts of USD indication. It is because investors increased the assets operation of EUR indication owing to worry about the bullish tendency of US dollar.

Bullish tendency of EUR has finely affect the Bank of Korea which operated the large foreign assets amounted to USD 100 billion.

Gim, Ung-Bae, officer of Bank of Korea announced “As the value of EUR has sharply increased, the asset operation of Bank of Korea started to adjust the increase of EUR weight”. However, commercial banks don’t have a large weight of EURO assets and so are in a dark corner of jump of EUR.

Large companies has watched the tendency of EUR carefully and investigated the loss and gain. Gim, Hong-Gi, manager of LG Chem forecasted “When the bullish tendency of EUR has been continued for the long term, the exports market will increased owing to improved purchase of European areas”.

Hyundai Motor which has the large foreign orders, is currently examining the measure to maximize the exchange gain by dividing the exporting quantity strategically. This strategy is to allot the quantity preferentially to the Europe market of EUR settlement, and to decrease the exporting quantity to USA of USD settlement.

However, large companies which settle in US dollar mind about the loss based on the weak tendency of US dollar, not gain from the bullish tendency of EUR. Officials of Korea Air Line said “Out of total revenues, revenues from Europe is still 4.5%. Accordingly, we care about the weak tendency of US dollar.

Rae-Jeong Park ecopark@donga.com