In May – Won against Dollar below the line of 1,200

As the won-to-dollar exchange rate decreased to less KRW 1,200 renewing the lowest value during a year (Increase of the Won value).

The foreign exchange market, KRW/USD rate was closed at KRW 1191.4 decreased by KRW 13.5 over the last week, on July 8. It was the lowest value after the lapse of 19 months since December 8, 2000 (KRW 1190.3). It decreased by KRW 122.1 (9.3%) over the end of the last year.

By realizing that the foreign exchange authority hardly protects the decrease of the exchange rate, KRW/USD rate started to decrease owing to sale quantity of KRW 150 million for foreign investment. In the Tokyo exchange rate of Japan, Japanese Yen decreased to Yen 118 from Yen 120 due to a rumor of Merck’s accounting irregularity. So, Korean Won also decreased considerably.

Korean Won and Japanese Yen decreased together, so Yen 100 was to around KRW 1,004.

The Ministry of Finance & Economy said “We will take a positive measures for the market stabilization because the psychology of the excessive exchange decrease is undesirable”. However, it was incompetent to protect the decrease of the exchange rate.

One foreign exchange dealer said that the market participants seldom respond to an intervention of the foreign exchange authority. As the Japan government accepts the Yen/USD rate up to the level (Yen 115) as of US terror, many of them are concerned about on which level the government will intervene in the market.

Sang-Chul Kim sckim007@donga.com