hankyoreh

With the value of the South Korean won climbing sharply against the Japanese yen, the won-yen exchange rate dropped to the 910 won to 100 yen range for the first time in six years and nine months.

The plunging yen is bucking the tendency for the value of the yen and won to decline together against a strong dollar, bolstering predictions that the exchange rate will fall below 900 won to 100 yen in the next year.

This would make things even more difficult for South Korean exporters who compete with Japanese companies in the international market.

In the Seoul foreign exchange market on Dec. 8, the two currencies were trading at 919.77 won to 100 yen, a 8.57 won (0.92%) decline from the previous day, according to a notice posted by Korea Exchange Bank at 3 pm. This was the first time that the exchange rate had dipped below 920 won since Mar. 6, 2008, when it fell to 915.01 won.

In other words, this is the strongest that the won has been relative to the yen at any time in the last six years and nine months.

With the value of the dollar climbing backed by a strong showing in US employment figures for November, the won-dollar exchange rate for the day closed at 1,117.7 won, 3.6 won higher than the previous day, representing a decline in the value of the won against the dollar.

Based on closing values, this was the highest figure in a year and three months, since Aug. 22, when the won hit 1,123 won.

But the won has been outstripped by the decline of the yen against the dollar, dragging down the won-yen exchange rate. The yen-dollar exchange rate on Monday rose to 121 yen to the dollar, reflecting the rapid clip of the yen’s depreciation.

The won-yen exchange rate entered a nosedive when the yen weakened following Japan’s decision to expand quantitative easing on Oct. 31, but the decline eased for a time after Korean foreign exchange authorities sought to intervene by promising to take action to couple the won’s movement to the yen.

But when the exchange rate dropped to the 930 won per 100 yen range on Nov. 20 for the first time in six years and three months, the rate resumed its fall. On Monday - just one day of trading after the rate fell to the 920 won per 100 yen range on Dec. 5 - it showed signs of falling below the 920 won mark.

“Predictions about the weak yen seem to be driving investors in the foreign exchange market to sell their yen and buy up won. As a result, the efforts of the financial authorities to force the won and yen to move in unison are having little effect. The won-yen exchange rate is sure to fall further, and next year it will reach the 800 won to 100 yen range,” said Jeong Kyung-pal, chief of the market analysis team at KEB Futures.

In a recent report, Korea Development Bank predicted that the won-yen exchange rate would drop to 895 won to 100 yen in the second quarter of 2015, 877 won in the third quarter, and as low as 844 won in the fourth quarter of the year.

By Kim Su-heon, staff reporter

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