On Thursday the won/dollar exchange rate fell to just over W980 then barely rose to above W1,000 again as a result of government intervention. The exchange rate had already fell below W1,000 recently. There will be something of a market rebound, but it seems people are accepting as reality the fact that for the time being the rate will be a three digit one. The development is significant because it is the first time the rate has fallen that far in the 7 years since the Asian financial crisis. Are there not many voices of concern expressing worry that it could hurt the economy at a time when there are hints of recovery? The speed by which it is falling is more reason for concern. It goes without saying that the government and business need to be thorough in their response.
The weak dollar, or the strong won, is something you might say is inevitable, because the US trade deficit and budget deficit continue to grow and a lot of dollars are making their way to Korea. It is also no small burden for the economy to have government authorities actively involved in the foreign currency market. The US and the IMF are applying various forms of pressure and the cost is great. The fact that it goes against the flow of the exchange market, leads to exchange speculation, and in the end could bring about a situation that requires urgent adjustment should not be ignored. The range of the fluctuation recently, however, is a problem because it has crossed that line within which the Korean economy can handle. This year the Yen and the Euro have been devalued 2 percent against the dollar, while the Won has been revalued at more than 3 percent. That makes Korean exports relatively less competitive. That is little less serious for conglomerates, but mid-sized companies could be hit hard.
The authorities need to adjust the speed of the fall of the exchange rate. Right now companies need to be given room to respond through the right minute adjustments. It would seem the management of foreign exchange assets needs to be done prudently and more skillfully as well. Considering cooperation on a common response with Japan, Taiwan, and the European Union would also be worth considering. Naturally, companies need to make the best of the situation by increasing productivity.
The Hankyoreh, 11 March 2005.
[Translations by Seoul Selection (PMS)]
[Editorial] Three Digits to the Dollar |
