Korea: Won appreciates further in October
October 19, 2012
The Korean won (KRW) hit a one-year high on 19 October when it traded at 1,103 per USD, 1.0% stronger than the level recorded on the same day of the previous month. On an annual basis, the currency is 2.5% stronger than in the same month last year. The strengthening of the won does not bode well for exporting companies, as a stronger currency could curb shipments overseas and thus further depress the already feeble external sector. Meanwhile, on 9 October, Korea and Japan agreed to end as of 31 October a temporary increase in the maximum amount of the bilateral currency swap arrangements by USD 57 billion, which was agreed in October last year. The value of the currency swap will thus return to the previous USD 13 billion. Both finance ministers and central banks stated that stable financial markets and sound macroeconomic conditions rendered the measure unnecessary. However, market analysts point to tensions between the two countries over the Dokdo/Takeshima islands as the trigger of the decision.