Strong Won Concerns

[Anchor Lead]

As the year’s last business day on the stock market came to a close Thursday, the won won-dollar exchange rate closed at 1,070 won and the won-yen rate at 949 won. The strong won has sparked jitters in the market. If the value of the Japanese yen drops, Korea's export competitiveness suffers while a weaker US dollar hurts export profitability.

[Pkg]

The won-dollar exchange rate on Thursday, the last business day of the year, closed at 1,070.50 won...the lowest in 2 years and 8 months.

[Soundbite] Seo Jeong-hun(KEB Hana Bank) : "With export firms increasingly unloading the greenback in the yearend, the exchange rate has hit a record low for the year."

The exchange rate started off 2017 in the 12-hundred won range but sharply plunged from the second half of the year. The rate dipped below 11-hundred won a month ago and has ended the year just over 1,070 won. The falling rate is due to many positive signs in the Korean economy including higher growth, improving indicators, an easing in North Korea related risk and expectations of restored ties with China. However a lower won-dollar rate hurts the profits of exporting firms and raise Korean export prices, thereby weakening the country's export competitiveness. The exchange rate factor has been somewhat overshadowed by Korea's brisk semiconductor shipments but it can deal a harsh blow to small and medium sized exporters which are vulnerable to currency risk management. Nearly half of domestic firms also cite the exchange rate as a major variable that will impact next year's business environment. The won-dollar rate in 2018 is expected to widely fluctuate between 1,060 and 1,155 won. Experts call for more aggressive risk management.