1,150 Won to the Dollar Collapsed

The won`s rise against the U.S. dollar, due mainly to the yen`s continued strengthening, has caused the won-dollar exchange rate to fall under 1,150 won per dollar for the first time in 35 months on October 8. Also, the yen-dollar exchange rates fell under 110 yen this day. From the opening, the won-dollar rate plunged to 1147.5 won per dollar for a while and closed at 1149.9 won, which fell 1.2 won (the won value rising) from the closing price of the previous day, at the Seoul foreign exchange market on October 8.

The government aggressively intervened in the foreign exchange market to maintain a 1,150 won per dollar rate, but it failed to cut the flow of the strong won.

Today’s won-dollar rates are the lowest level reached since November 7, 2000 which closed at 1141.8 won per dollar.

The won-yen exchange rate closed at 1048.6 won to 100 yen, an increase of 1.9 won from that of the previous day.

The strong won was influenced by Duisenberg, the president of the European Central Bank’s utterance, “The slack dollar is unavoidable,” and Takenaka Heizo, the minister for Japanese Financial Service’s statement, which appeared to be one of an approval for a strong yen, said, “The strong yen is more desirable than a disposed Japanese asset, which lost its popularity in the international market,”

Meanwhile, with the expectation of the revival of Japanese economy and the spreading rumor that the Japanese government has limitations in intervening in the foreign exchange market, the yen-dollar rate closed at 109.76 yen, which dropped 0.88 yen from the previous day. The yen-dollar rates, previously at 110 yen to one, have fallen for the first time since the November 2000.

With the strong yen, the average stock price of the NIKKEI closed at 10,542.20 yen, a decrease of 278.13 yen or 2.57 percent from the previous day.

Korean foreign exchange markets experts forecasted that despite the government’s effort to affect the won-dollar rates, it is difficult to keep the rate at 1,150 won per dollar because the decline in the won-dollar rate has already been expected. And at the end of the year, the range could fall between 980 won to 1130 won per dollar.

sanjuck@donga.com parkwj@donga.com