The won, which opened the day at 929.00 won to the greenback, and rose to as much as 934.7 won in midday, ended at 929.60, up 2.4 won from the previous day's close on concerns over a weakening dollar.
This time last month, the won was hovering around 960 won per dollar. Such a sharp currency appreciation is prompting concerns among the nation's exporters, as a strong won makes their products more expensive overseas.
For small and mid-sized businesses, the won's rise is posing more serious problem, since their business objectives for this year were based on a projected average exchange rate of 1,012 won per dollar. According to Samsung Economic Research Institute (SERI), a private think tank, local companies would more or less break even at an exchange rate of 953 won per dollar.
Reflecting mounting concerns, a group of business associations, including the Federation of Korean Industries, yesterday urged the government to intervene in order to stem the won's further rise.
"The won's ascent against the dollar has reached a point where exporters cannot endure any more," they said in a statement. "The government has to come up with measures to guarantee an environment where local companies can pursue sustainable growth and strengthen their global profile."
The South Korean government has been criticized for being inactive in response to the won's rapid upward march.
"The recent climb of the won is due mainly to a weakening dollar," a government official said. "Therefore, it would benefit only speculators if the government were to intervene."
Some analysts say the won's climb will likely slow down soon. This view is based on the nation's current account deficit in the first quarter and the outflow of foreign investment from the Korean stock market, both of which will ease the pace of the won's appreciation, they said.
"There are few factors that would upset the won's move," a researcher at Hyundai Economic Research Institute said. "However, the pace does stand to eventually slow down."
The Samsung Economic Research Institute also predicted the won's upward move will lose its steam steadily, given its sharp rise in recent weeks as well as the reduction in trade surplus due to the won's appreciation. It forecast that the exchange rate would stabilize at an average of 960 won per dollar this year.
The institute also suggested a worst-case scenario in which the won could rise to the 900 range, thus slowing down the nation's economic growth rate from the previously projected 5 percent to only 4 percent.
