Core inflation, which strips out oil and most agricultural goods, topped the central bank's target rate for three straight months as the falling won pushes up the cost of imported goods.
"If the currency doesn't stabilize, it will be difficult to achieve this year's inflation target," Bank of Korea Governor Chon Chol-hwan said after a policy meeting earlier this month. The Bank of Korea has pledged to stem the won's decline, signaling it may use part of its US$94.4 billion in foreign reserves to buy the currency.
The central bank assumed the won's value would range from 1,220 to 1,250 per dollar this year when it set its 2001 core inflation target of between 2 percent and 4 percent, Chon said. The currency hasn't been that strong since late February.
For some, a weaker won is good news. Companies that are driven mainly by exports -- and that don't rely heavily on imported raw materials and parts -- stand to gain as their goods become cheaper for overseas customers.
"If we look at exports, the weaker won will definitely increase our profit," said James Chung, a spokesman for Samsung Electronics Co, the world's biggest computer memory chipmaker, without giving a specific forecast. Samsung makes 70 percent of its sales overseas.
For every 100 won the currency falls, profit rises by 1 trillion won, according to Koo Hee-jin, a semiconductor analyst at LG Investment & Securities Co. Even as the won's decline makes it more expensive for Samsung to buy imported parts and equipment and repay overseas loans, the boost to overseas sales more than compensates for those costs, Koo said.
Hyundai Heavy Industries Co, the world's biggest shipbuilder, is also getting a lift from the currency's slide. The company raised its net income forecast for 2001 by as much as 71 percent, saying the weaker won will inflate the value of overseas sales and make its ships more affordable overseas.
That's little consolation for Park Soon-nam, whose 20-year old daughter is studying for a business degree at the University of Southern California.
Park cut her daughter's allowance to US$700 from US$1,000 this month as dollars became more expensive. Spending on overseas education -- about 150,000 Koreans study abroad -- fell to US$81.5 million in the first two months of this year, about half the US$163 million spent during the same period last year.
"I'm getting worried," Park said. "If the dollar stays this expensive, I'm not sure I'll be able to afford her allowance next month."
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