The wons appreciation looks set to continue
|Hyun-Oh-seok, reesident of the Trade Research Institute within KITA|
How can Korea's IT exporters guard against the impact of further rises by the won against the US dollar
In an interview on the rise of the won with The Korea IT Times, Hyun Oh-seok president of the Trade Research Institute within the Korea International Trade Association (KITA) said international traders in general and export-oriented IT businesses in particular should fortify their exchange risk controls. To stem exporting at below cost, Mr. Hyun advised exchange risk hedging through futures, diversifying the means of settlement into yen or euro, and adjustment the timing of exports, and so forth.
As the supply of dollars increases through the rise in the current account surplus to $27.6 billion, their rate of exchange against the won is falling too quickly, he explains. On the prospects for exchange rates this year, Mr. Hyun forecasts, "As the dollar's bearish trend continues, the won's appreciation will continue also although there is the possibility that the dollar's weakness will slow down.
In relation to exchange risk controls practiced by domestic companies, Mr. Hyun indicated that just 29% of export companies enforce such controls, adding that it is urgent to secure the price competitiveness of export companies as well as an appropriate level of profit through a stable exchange rate framework.
As the won soars against the dollar, IT and electronic businesses are concerned about its impact on exports and on getting a good return from them. (According to a survey by KITA among export companies, the appropriate won-dollar exchange rate was 1,096 won to the dollar, on average).
As a countermeasure to declining returns from exports, 33% of respondents replied that they are attempting to increase export prices, 22% are aiming to reduce costs, and 17%, pioneer new markets.
It is the desire of IT business circles that the government stabilizes the exchange rate to prevent the won from appreciating at an excessively fast rate.
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