SEOUL, Nov. 22 (Xinhua) -- South Korea's currency rapidly fell in recent weeks versus the U.S. dollar, boosting worry about local exporters.
The won/dollar exchange rate settled at 1,089.1 won per dollar Wednesday, down 6.7 won from the previous close.
The exchange rate retreated fast in recent weeks. It closed at 1,130.5 won per dollar on Oct. 27, falling below 1,100 won last Thursday. The rate declined below 1,090 won Wednesday.
The strong currency came from solid fundamentals of the South Korean economy, which has posted current account surplus between 80 billion U.S. dollars and 90 billion U.S. dollars in recent years.
Economic growth outlooks were revised up by both the central bank and the government, while geopolitical risks de-escalated on the Korean Peninsula as the Democratic People's Republic of Korea (DPRK) staged no provocation for over two months.
The Bank of Korea (BOK) was widely forecast to raise its benchmark interest rate from an all-time low of 1.25 percent as early as this month.
Given the strong fundamentals, the local currency should have risen further to the greenback, but the falling pace of the won/dollar exchange rate was so swift to have a negative impact on local exporters.
Big corporations can hedge the currency risk, but small exporters are expected to be damaged by the fast advance of the domestic currency as they depend on price competitiveness in the global market.
The won's appreciation can reduce import costs and help domestic consumers spend more in the local market, but local experts estimated the strong currency could just increase people's overseas trips, rather than expand domestic consumption.
Auto and shipbuilding industries are forecast to be hit hard by the local currency's rapid appreciation to the dollar. Top automaker Hyundai Motor and its affiliate Kia Motors lost ground in the main bourse on growing worry about the strong won.
According to the Korea Automobile Manufacturers Association's estimate, the fall of the won/dollar exchange rate by 10 won would reduce the country's auto cars by about 420 billion won (385 million U.S. dollars) annually.
The South Korean currency recently appreciated to the Japanese yen, worsening the price competitiveness of South Korean automakers.
Japanese carmakers, including Toyota and Honda, sold more cars in the United States for the first nine months of this year than they sold in the same period of last year. South Korean car manufacturers sold less in the U.S. market in the same period.
Shipbuilders will hit hard by the strong currency as the won's appreciation raises the ship price and lead to a fall in orders to build ships.
The strong won will help importers, including oil refiners and steelmakers, reduce import costs. Oil refiners import crude oil with the U.S. dollar, while steel-making companies pay imported iron ore with the greenback.
South Korean oil refiners reportedly import about 1 billion barrels of crude oil annually. Imported raw material such as iron ore and coal account for about 80 percent of production costs for local steelmakers.
