.jpg) Won-dollar rate falling below 1,200 won: A currency dealer makes a call at the Korea Exchange Bank (KEB) headquarters in central Seoul, Wednesday. A large screen shows that the Korean won closed at 1,194.4 won against the dollar, gaining 9.4 won from the previous day’s trading. It was the first time for the won-dollar rate to fall below 1,200 won since September last year. / Korea Times Photo by Cho Young-hol |
By Yoon Ja-young
Staff Reporter
The won/dollar rate fell below 1,200 won Wednesday as the Korean currency continued to gain ground against the greenback amid an inflow of dollars on the bourse.
It closed at 1,194.4 won per dollar, gaining 9.4 won in value from the previous day's trading. It is the first time it has fallen below 1,200 won since September last year.
The won started trading at 1,200.1 won per dollar, but ongoing buying by foreign investors on the bourse gave it further momentum. They bought 121.4 billion won shares from the main bourse, while selling 1.3 billion won shares on the junior Kosdaq market. The main index KOSPI, however, fell 7.41, or 0.43 percent, to close at 1,711.47.
Analysts cite a global weakening of the dollar and the inflow of the currency to Seoul as reasons.
"The dollar is turning weak as safety assets aren't preferred as strong as before upon growing expectations of global economic recovery and stabilization of the financial market," said Jeong Young-sik, a research fellow at Samsung Economic Research Institute.
Jeong cited falling volatility indices as well as the U.N. mentioning the need for a new key currency to substitute for the U.S. dollar.
Analysts also point to the dollar carry trade following the plunge of the dollar interest rate.
Domestically, expectations on economic recovery and the inflow of foreign funds are making the Korean currency stronger.
Analysts and rating agencies are becoming positive about the Korean economy, and CDS premium is falling. Foreigners bought 4.7 trillion won in shares from Seoul in September.
Jeong added that the diminishing geopolitical risk following former U.S. President Bill Clinton's visit to North Korea is also encouraging an inflow of dollars.
Analysts agree that the dollar will continue to be weak next year. "The trade account surplus is continuing, and the capital account surplus is also likely to continue as foreigners buy stocks and bonds,'' said Won Sang-pil, an analyst at Tong Yang Securities.
Investors won't prefer safety assets much as the economy recovers, and a growing fiscal deficit in the United States will also make the dollar weaker. The fiscal deficit in the United States is estimated to be $1.4 trillion in 2010, or 9.7 percent of GDP.
"Domestically, the dollar is expected to continue inflowing in 2010, upon a current account surplus and foreign investors on the Seoul bourse," Jeong said. He added that the won is still undervalued.
However, the pace of the exchange rate change will get slower. "There is a strong expectation in the market that the government will intervene upon a steep plunge of the won/dollar rate," Meritz Securities reported.
When the local currency strengthens, it is usually domestic industries that gain. Banks, wholesale and retailers, food and beverage, and utility shares are examples of beneficiaries.
Tong Yang Securities analyst Won cited airliners as the biggest beneficiaries. "The demand on international airlines is fast recovering,'' Won said, citing a weakening of the dollar as a major boosting factor for overseas travelers.
He pointed out that the stake of foreign investors in Korean Air, which hovered below 10 percent in July, now stands at above 22 percent already.
chizpizza@koreatimes.co.kr
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