The South Korean won has remained one of the best performing currencies against the stronger U.S. dollar in terms of value since early June, when the European Central Bank announced a quantitative easing program, data showed Wednesday, spurring calls for measures to ease its appreciation to help local exporters.
The dollar has steeply strengthened against the euro and other major currencies on strong U.S. economic data and the ECB’s move to adopt a bond buying program to boost the flagging eurozone economy.
According to data analyzed by Hana Daetoo Securities, the value of the won dropped 0.9 percent against the greenback from June 4 through Sept. 12, when the dollar advanced to a six-year high versus the Japanese yen. The won finished at 1,035.30 won to the dollar on Sept. 12.
Despite the depreciation, the local currency remains the strongest among 32 currencies except for eight Asian currencies tied to the greenback and economies that have raised their key interest rate, which usually raises demand for a country’s currency.
The Chinese yuan and Hong Kong dollar are pegged to the greenback, while the Singapore dollar is tied to a basket of major currencies. Malaysia and the Philippines have raised their key interest rates since July, while Thailand, Indonesia and Taiwan are widely expected to do the same.
Korean policymakers have paid keen attention to the strengthening local currency for its potential impact on major exporters that support Asia’s fourth-largest economy, coupled with the weakening Japanese yen under Tokyo’s aggressive accommodative monetary policy to boost its economy.
The won-yen rate rose to a nearly six-year high on Sept. 3, raising concerns over the competitiveness of domestic firms that compete with Japanese rivals in the tech and auto sectors.
Market watchers said the intensifying global “currency war” may add to pressure on the central bank to further cut its base rate later this year, following a quarter percentage cut in August.
“The won would have faced stronger upward pressure if (the Bank of Korea) had not cut the key interest rate in August,” Shin Dong-joon, an asset researcher at Hana Daetoo Securities, said.
“Until stimulus measures show tangible effects, (the government) should support export companies by taking such measures as an additional rate cut.” (Yonhap)
