Won hits 10-year high against dollar
The Korean won rose to a 10-year high against the dollar yesterday, extending the period of upward movement to six consecutive sessions.
The won closed at 913.7 against the greenback, the highest since the exchange rate on Oct. 2, 1997, of 913.5 won per dollar. The global weakness of the dollar and the widening gap between interest rates in Korea and the United States are cited as the main factors contributing to the Korean currency's gains.
The Bank of Korea's overnight call rate is at a six-year high of 5 percent, a quarter-point above than the U.S. benchmark rate. The rate gap and speculation that the U.S. Federal Reserve may further cut rates are boosting demand for local assets, experts said.
The Korean won has had a strong upward momentum since the Fed cut interest rates last month. "The global weakness of the dollar is behind the overall rise in regional currencies," said Kim Tae-wan, a dealer at Kookmin Bank in Seoul. "The strength in Asian currencies will persist as long as there's a demand for their assets."
The sharp appreciation of the local currency is a cause of serious concern for Korean economic policymakers as well as companies, as it saps exporters' profitability.
The Bank of Korea earlier said that the foreign exchange authorities are watching closely the movement in won-dollar exchange rates and will intervene should the gains in won value become excessive.
Source: http://www.koreaherald.co.kr/
VOCABULARY LIST :
greenback (noun) - A note of U.S. currency; a piece of paper money
appreciation (noun) - An increase in price or value
saps (verb) - Deplete; exhaust; use up
DISCUSSION POINTS :
1. What can you say about the increase of the Korean Won against the dollar?
2. What are the advantages and disadvantages of the Won's appreciation?
3. How can the people of Korea benefit from this? What is its effect on your country's economy?
4. What are the factors that contribute to a currency's appreciation?
5. Is there a way to prevent a currency's depreciation?