Korea: Korean won continues on upward trajectory
May 30, 2014
The Korean won (KRW) is continuing on its relentless increase against the U.S. dollar and the Japanese yen, reflecting the country’s strong economic recovery and the current account surplus. The won, which has broken through to multi-year highs in recent months, traded at KRW 1,020 per USD at the end of May, which was 1.3% stronger than the level observed at the end of April and 9.5% stronger than the level in the same month last year. Moreover, the Korean currency appears to be on an unstoppable upward path, having reached yet another record-high this time of KRW 1,015 per USD on 11 June and thus moved toward the KRW 1,000 per USD psychological floor.
Market analysts have occasionally suspected that Korean monetary authorities were intervening in the country’s foreign exchange market with the latest intervention presumed to have occurred in mid-May. The authorities’ limited ability to use currency-market intervention to stem the appreciation of the won, reflects the strength of the underlying upward pressures.
Author: Ricardo Aceves, Senior Economist