South Korean companies are being seriously squeezed by the won's rise as the appreciation of the local currency is greater than they had expected earlier this year, businessmen and analysts said.
The won, which gained nearly 2 percent this month to a nine-year high against the dollar, appeared to be unstoppable on its upward swing until financial authorities intervened on a massive scale on Friday.
Following the intervention, the won dropped 0.7 percent against the greenback to close at 920.30 won on Friday, up 6.50 won from the previous day.
"Thanks to the massive intervention, the market stabilized considerably. The government must have shelled out some US$1.5 billion on Friday," a dealer with Kookmin Bank said.
It was the largest sum of intervention this year, but its impact was dulled considerably as exporting companies and banks seized on the chance and sold their backed-up dollars en masse.
The won's rise was also dampened by news reports that top officials of the central Bank of Korea and the finance ministry met on Friday to discuss ways to curb the won's appreciation.
The Bank of Korea and the government also attempted to talk down the won's strength.
Central bank Governor Lee Seong-tae said last week that the bank's policy makers "considered and discussed" the foreign exchange rate.
Finance and Economy Minister Kwon O-kyu went a step further, saying the government would conduct "smoothing operations" to check the won's advance if necessary.
Kwon conceded that the country's exports-driven economy is under pressure from the won's rise.
The central bank last week cut its economic growth target for next year from 5 percent to 4.4 percent amid sluggish private consumption and investment.
The local currency, which closed at 928.60 won a week earlier, had kept on rising against the greenback for seven consecutive trading days, reflecting the global weakness of the US currency and speculative demand for the won.
The won has gained nearly 10 percent against the dollar so far this year, making South Korean products more expensive abroad and depressing most of South Korean manufacturing companies relying on exports.
The won's strength seriously dented manufacturing firms' bottom lines this year. The operating profits of listed manufacturing firms fell 10.6 percent year on year in the first nine months of the year, the Korea Stock Exchange said.
The ratio of operating profits on sales slumped 1.33 percentage points to 6.78 percent.
Samsung Economic Research Institute said exporting companies set their break-even exchange rates at 949 won in the case of automakers, machineries at 999 won and chemical products at 905 won.
RETHINK? The defense ministry and Navy Command Headquarters could take over the indigenous submarine project and change its production timeline, a source said Admiral Huang Shu-kuang’s (黃曙光) resignation as head of the Indigenous Submarine Program and as a member of the National Security Council could affect the production of submarines, a source said yesterday. Huang in a statement last night said he had decided to resign due to national security concerns while expressing the hope that it would put a stop to political wrangling that only undermines the advancement of the nation’s defense capabilities. Taiwan People’s Party Legislator Vivian Huang (黃珊珊) yesterday said that the admiral, her older brother, felt it was time for him to step down and that he had completed what he
Taiwan has experienced its most significant improvement in the QS World University Rankings by Subject, data provided on Sunday by international higher education analyst Quacquarelli Symonds (QS) showed. Compared with last year’s edition of the rankings, which measure academic excellence and influence, Taiwanese universities made great improvements in the H Index metric, which evaluates research productivity and its impact, with a notable 30 percent increase overall, QS said. Taiwanese universities also made notable progress in the Citations per Paper metric, which measures the impact of research, achieving a 13 percent increase. Taiwanese universities gained 10 percent in Academic Reputation, but declined 18 percent
CHINA REACTS: The patrol and reconnaissance plane ‘transited the Taiwan Strait in international airspace,’ the 7th Fleet said, while Taipei said it saw nothing unusual The US 7th Fleet yesterday said that a US Navy P-8A Poseidon flew through the Taiwan Strait, a day after US and Chinese defense heads held their first talks since November 2022 in an effort to reduce regional tensions. The patrol and reconnaissance plane “transited the Taiwan Strait in international airspace,” the 7th Fleet said in a news release. “By operating within the Taiwan Strait in accordance with international law, the United States upholds the navigational rights and freedoms of all nations.” In a separate statement, the Ministry of National Defense said that it monitored nearby waters and airspace as the aircraft
UNDER DISCUSSION: The combatant command would integrate fast attack boat and anti-ship missile groups to defend waters closest to the coastline, a source said The military could establish a new combatant command as early as 2026, which would be tasked with defending Taiwan’s territorial waters 24 nautical miles (44.4km) from the nation’s coastline, a source familiar with the matter said yesterday. The new command, which would fall under the Naval Command Headquarters, would be led by a vice admiral and integrate existing fast attack boat and anti-ship missile groups, along with the Naval Maritime Surveillance and Reconnaissance Command, said the source, who asked to remain anonymous. It could be launched by 2026, but details are being discussed and no final timetable has been announced, the source