The Korean won is gaining ground over both the U.S. dollar and the Japanese yen, increasing the potential of further weighing down export-dependent recovery efforts of Asia’s fourth-largest economy.
The won-dollar exchange edged near the 1,050 won line on Wednesday, leading lawmakers to urgently alert monetary policymakers to intervene to keep the rate from falling below the psychological and marginal threshold of 1,000 won.
Increased demand for the local currency led the exchange rate to further dip by 5 won at 1,055.8 won to the dollar on the same day with the benchmark KOSPI sliding 0.99 percent to 2,035.75 on institutional selling.
The continued inflow of foreign investments, mostly from the U.S., in stocks and bonds has spurred the won against the dollar on expectations that the U.S. Federal Reserve would delay its much-anticipated tapering of its easy money.
The appointment of Janet Yellen as the next Federal Reserve chief ― who is perceived to be a “dovish” policymaker in favor of maintaining monetary stimulus for growth ― and the U.S. unemployment rate falling short of its September target are driving global funds to invest in higher-yielding assets in markets with sound fundamentals such as in Korea.
The U.S. jobless rate for September fell slightly to 7.2 percent with 148,000 jobs created, far less than the market forecast of 180,000.
Bank of Korea Governor Kim Choong-soo suggested that the U.S. Federal Open Market Committee is unlikely to reach a consensus in a meeting next week on quantitative easing tapering this month.
“Given the job data, the FOMC’s position (on quantitative easing) would likely remain unchanged,” said the BOK governor in an economic meeting on Wednesday.
However, analysts said that Korea’s currency and stock markets would need to brace for foreign selling en masse as the timing and scale of monetary cuts in the U.S. would resurface at the FOMC meeting toward the end of this year.
Four members of the 12-member FOMC, who are neutral and dovish over easy money, will be replaced next year, while two hawkish members remain on the committee.
Analysts projected that tapering could start as early as next year since the U.S. payroll data, albeit still weaker than its usual target of around a 5 percent unemployment rate, does not mean that the world’s largest economy is heading for a slowdown.
“It just means that expectations for the U.S. economic recovery have slightly dropped. Still, it is not an alarming factor that the market should be too concerned about,” said Lee Sang-jae, an economist at Hyundai Securities.
By Park Hyong-ki (
hkp@heraldcorp.com)
