Forex Blog: Currency Trading News & Analysis.

March 23rd 2005

Won strength “unavoidable”

Analysts are increasingly calling on South Korea to accept a strong Won as unavoidable, regardless of its desirability. They say the strong Won is not driven by factors that South Korea can control; rather, it is a product of a weaker dollar. South Korea should accept that the effects of any intervention to stabilize the USD-Won exchange rate will be ephemeral at best, and South Korea will be stuck with more USD reserves. South Korea has recently asserted that the Won’s weakness is a result of hedge fund speculation, which may or may not be true. Regardless, analysts call on South Korea to identify new markets outside of the US for their products. They argue the value of the Won has not changed relative to other nations’ currencies; therefore, they could just easily increase market share in those countries, instead of relying on the USD to strengthen.  The Korea Times reports:

“At the same time, we must realize that this appreciation is only relative to dollar-based currencies, and it has not affected our competitiveness in other markets such as the euro area and the British pound,’’ one insider stressed. “So, strategically it’s time to try and protect our market position in dollar-based markets to avoid losing market share, while actively using our continuing competitiveness in non-dollar markets to continue building successful market positions in other currency areas like Europe.’’

Read More: Strong Won: Undesirable, But Unavoidable

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Posted by Adam Kritzer | in Exotic Currencies | No Comments »

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