S. Korean currency expected to reach range of 800 won to dollar: report

The South Korean currency is expected to gain further strength and reach the range of 800 won to the U.S. dollar next year, as the greenback will likely continue to remain weak, according to a report released Monday by a research institute.

The U.S. dollar's downward trend over other currencies is forecast to continue next year as the United States is expected to find it difficult to reduce its large current account and budget deficits, the Hyundai Research Institute said in the report.

The report also said that if the U.S. Federal Reserve lowers or freezes its key rate for fear of a slowing economy, which involves a possible capital outflow, the U.S. dollar will face further depreciation against other currencies.

On Monday, the local currency ended at 956.50 won to the dollar, down 0.2 won from Friday's close, as the Japanese yen lost against the dollar.

The won has gained more than 5 percent against the U.S. greenback this year. A stronger won makes local products more expensive overseas and erodes the value of dollar-denominated profits when converted into won.

The report added that the pace of the won's rise against the dollar will be faster if China implements a further revaluation of the yuan.

China revalued its currency by 2.1 percent in July last year and cut the currency free from a decade-old dollar peg to float within managed bands. But the U.S. and other advanced countries have made concerted calls for a further appreciation of the Chinese currency to ease trade imbalances with them.

The institute also called for the government to ease regulations on capital flows to promote investment and reduce the size of the capital account surplus as part of its efforts to curb the won from appreciating sharply against the dollar.

The capital account, which tracks cross-border investments, posted a net inflow of US$1.7 billion in July this year, compared with a net outflow of $1.7 billion a month earlier, the nation's central bank said.

Seoul, Sept. 18 (Yonhap News)