The South Korean won declined to almost two-month low level against the U.S. dollar today as the global economic crisis worsened, prompting investors to sell the emerging markets assets.
Since January 1st until today the Korean currency has fallen 11 percent versus the dollar, showing one of the worst results among the most-traded Asian currencies. The Japanese economy slid by 12.7 percent 2008 according to the latest report that was released late yesterday. The analysts expect that the Korean economy will fall by at least 6 percent this year.
There are ideas in the markets that the U.S. is entering a new level of the economic crisis when the bail-out and stimulus packages will no longer bring a relief to the troubled sectors. The automakers and the bankers will meet the new challenges in March and there are chances that they wont be able to deal with these challenges.
The Korean won has a plenty of space to depreciate as the weaker won will help the Korean economy to recover from the crisis and to offer the very competitive export prices. The monetary authorities wont put any obstacles to the wons decline at least until it reaches around 1,400 per dollar level.
USD/KRW rose from 1403.6 to 1427.3 as of 6:15 GMT today — the level not seen since late December.
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