Tuesday, March 11, 2008

How Far May the Won Fall in 2008?

South Korea's won may fall considerably in the first half of 2008 as global credit-market losses lead overseas funds to sell holdings in Korean stocks according to a report out this week from State Street Global Markets.

The 3.1 percent drop so far this month in the Won's value vis a vis the dollar make it the world's worst currently performing major-exchange rate. Many economists consider that the decline will continue if the current-account deficit widens and the funds from stock sales continues.

Overseas investors have sold more Korean shares than they bought nearly every day this year on concern slowing global economic growth will damp demand for exports. Korea's won and the Indian rupee are the only two of Asia's 10 most-traded currencies outside of Japan that have weakened versus the dollar in 2008.

Cross-over equity flows, or purchases of stocks by overseas investors, into South Korea are the second weakest among the 29 developed and emerging-markets economies tracked by State Street Global Markets, the world's largest institutional money manager, and Korea's stock index has slipped 14.1 percent so far this year.

Korea's currency fell 1 percent this morning to 974.45 per dollar as of 1:41 p.m. local time, and this was the biggest decline since last August with the won reaching its lowest level since March 2006.

Korea's current-account is expected to run a $7 billion deficit this year according to the finance ministry yesterday, a figure which is twice the central bank's $3 billion forecast. Growth will fall short of 5 percent in 2008 and an earlier estimate of 6 percent because of slowing shipments abroad, Finance Minister Kang Man Soo said last week.


Jeehoon Ki said...

I wonder this post is your view or just a summary of news and others' opinion.

I just found your blog and don't know about how it works. So please understand if my question is inappropriate.

Edward Hugh said...

Hello Jeehoon,

This is really a summary of others opinions. I do have my own views on many matters - which you can read over at Global Economy Matters - but really this blog is just a sort of notebook on the Korean economy, which I do think is important to get a hold of a more complete picture of what is happening in the global economy, but I certainly don't consider myself sufficiently knowledgeable about the Korean economy itself to advance an analysis at this point. I am still watching and learning.

Abeesh said...
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Abeesh Thomas said...

I think WON will become stronger by the end of December 2008. The Oil price will start rising again due to demand and supply theory. In such a scenario, we will be seeing the WON becoming stronger against Dollar.Just my 2 cents Forecast.

Abeesh Thomas