The South Korean currency’s ascent to the Japanese yen hit a 14-year high last year, the central bank said Monday, spawning concerns about its impact on Seoul’s exports.
The local currency reached 1,238.3 won per 100 yen as of the end of 2012, up 19.6 percent from a year earlier, according to the Bank of Korea.
The 2012 numbers marked the strongest gain since the won appreciated 21.8 percent against the Japanese yen in 1998, it added.
Last year, the local currency also appreciated 7.6 percent per the dollar, the strongest gain since 2009.
The won’s sharp gain came as advanced economies’ drive for massive credit easing spurred capital inflows into South Korea, whose assets were largely viewed as attractive amid the country’s sovereign credit upgrades.
The BOK said that South Korean banks’ daily foreign exchange trading volume fell to the lowest level in two years in the fourth quarter of last year amid decreased currency volatility.
The daily foreign exchange trading volume among banks averaged $19.52 billion in the October-December period, down 9.9 percent from three months earlier, the BOK said.
The fourth-quarter data marked the smallest turnover since $19.28 billion in the fourth quarter of 2010.
For the whole year of 2012, the daily FX turnover grew 1.4 percent on-year to an average of $21.59 billion, the bank added.
The BOK said that decreased currency volatility seemed to prevent banks from actively engaging in trading FX spots, which were also crimped by weak exports.
Daily transactions of foreign exchange spots declined 24.1 percent on-quarter to $7.01 billion and FX swaps inched down 1.74 percent to $10.76 billion.
Meanwhile, the volatility of the South Korean currency eased to a nine-year low in 2012, the BOK said.
The average daily volatility of the local currency reached 0.29 percent last year, down from 0.51 percent in 2011. The 2012 data marked the smallest on-day volatility since an identical 0.29 percent in 2003.
The central bank said the won’s 2012 volatility was the fourth-lowest among 15 currencies out of the Group of 20 nations.
The Korean currency has relatively high volatility as the country’s foreign exchange markets have not grown fully enough to absorb external shocks and are exposed to excessive capital moving in and out of the country.
BOK Gov. Kim Choong-soo said that the central bank plans to actively cope with any increased currency volatility stemming from the Japanese yen’s sharp weakness that hurts Seoul’s exports. (Yonhap News)
