South Korean won declines near to 2 month high

02-16-2009 14:42

Today the global economic crisis deteriorates as the South Korean won decreased against the American dollar, approaching the two-month low level. This resulted in investors selling the emerging markets’ assets. In 2009 the South Korean won has declined by 11% against the dollar which is one of the poorest performances among the most-traded Asian currencies. Yesterday’s report showed that the Japanese economy decreased by 12.7% in 2008. Analysts believe that the Korean economy wil shrink by at least 6% in 2009.

Some market participants expect that the US will face a new stage of the economic crisis as the bail-out and stimulus packages will not be suficient for the problematic sectors. It is to be expected that the banking sector and automakers will meet new problems in March which they might not be able to fight.

A weaker won will result in very competitive export prices and it will stimulate the Korean economy. For that reason a depreciation of the Korean won could be positive as the monetary authorities will not take any measures before it reaches a 1,400 per dollar level.

For the first time since the end of December USD/ KRW went up from 1403.6 to 1427.3.