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Won Still Gaining Against Japan’s Yen

Posted October. 03, 2006 06:58,   


The won`s strong rally against the Japanese yen continued for the sixth day in a row, breaking the W800 mark per Y100 in midday trading on October 2. The strengthening won broke this threshold for the first time in 8 years and 10 months since November 17, 1997.

A strong won lowers the relative price competitiveness of Korean products in Japan and other countries, as a number of Korean goods and Japanese products compete fiercely in the global market. This, in turn, deteriorates Korea’s export and current account balance.

In the Seoul foreign exchange market, the value of won dropped to W799.76 per Y100 and closed at W800.90, down W1.70 from the closing price on September 29.

Experts expect that continued weakening of the yen will soon totally break the threshold of W800 against Y100.

“A drop in export profitability is a problem. But a bigger problem is the strong won one year before the presidential election. We saw this trend right before Asian financial crisis in 1997. The government must come up with a solution as soon as possible by analyzing the correlation between the yen and the won,” said Kim Jeong-shik, an economic professor at Yonsei University.

In the meantime, a researcher of LG Economic Research Institute, Song Tae-jung, said, “Highly possible is the rising value of yen, thanks to Japan’s rapid economic recovery. A strong won against the yen might be a temporary phenomenon.”

jinhup@donga.com jarrett@donga.com