By Kim Jae-kyoung
Staff Reporter
The Korean won is expected to remain bullish against the U.S. dollar, on the back of eased concerns over short-term external debt caused by a sizable improvement in trade balance, according to market analysts.
They said that the local currency may continue to benefit from reduced U.S. policy risk and the likelihood of a large, positive swing in trade and current account surpluses this year.
The won closed at 1,340.5 won per dollar, Friday, down 6 won from the previous close. But it gained 51 won for the last three trading days and 129.5 won from a month ago. It closed at 1,570 won on March 2.
``The balance of payments has been transformed from a source of won weakness to a source of strength thanks to the positive swing in the current account, which, alongside some improvement in global risk appetites, has helped attract confidence-sensitive capital inflows,'' ING Group senior economist Tim Condon said.
``We expect the won-dollar rate to drift steadily lower on the trend improvement in the balance of payments,'' he added. ``The won was Asia's underperforming currency in 2008. We expect it to be Asia's top performer in 2009.''
The nation's trade surplus reached a record high of $4.6 billion in March on the back of a surge in exports of ships and a plunge in imports. It was the largest monthly surplus since it recorded $3.8 billion in April 1998.
Exports fell by 21.2 percent to $28.3 billion last month due to a robust growth in ship sales, while imports dipped 36 percent to $23.7 billion.
HSBC senior Asia economist Frederic Neumann said that imports are expected to continue to drop sharply, leading to a continuous improvement in Korea's trade balance and alleviating concerns over an external payments squeeze in Korea.
``In fact, with vessel deliveries spiking over the coming months, the decline in Korea's short-term external debt should exceed any potential draw-down in official reserves, which will improve the short-term debt to foreign exchange reserves ratio.
``Korea's external payments position, in short, is rapidly improving, which should also boost sentiment vis-a-vis the won,'' he explained.