Surging Korean Won vs Yen Prompts Concern; The exchange rate between the two Asian countries is closely watched, as they compete head-to-head around the world to sell everything from smartphones to cars.

Surging Korean Won Prompts Concern

Samsung Declines on Worries Currency’s Strength Will Hurt Profits


Updated Jan. 3, 2014 7:46 p.m. ET

The South Korean won fell against the dollar and yen after officials there hinted they were ready to intervene to curb the currency’s strength. The remarks from two South Korean finance officials came after the won hit a two-year high against the dollar last week and reached a five-year high against the yen Thursday.The exchange rate between the two Asian countries is closely watched, as they compete head-to-head around the world to sell everything from smartphones to cars. The won’s 17% rise against the yen since June has come as Tokyo has sought to weaken its currency to help kick-start the Japanese economy.

Also Friday, the euro dropped to a four-week low against the dollar, and the U.S. currency strengthened against the Swiss franc and U.K. pound.

In South Korea, the currency decline is spilling over into the stock market. South Korea’s benchmark index ended Friday at a four-month low, and technology giant Samsung Electronics Co. 005930.SE -0.99% was down 5.5% this week, in part because of fears the won’s strength will hurt its profits.

“We will strengthen our monitoring for offshore flows and, when needed, carry out stabilizing measures for financial and foreign-exchange markets,” said Bank of Korea governor Kim Choong-soo in an address to financial institutions Friday.

Those comments came on the same day South Korea’s finance minister, Hyun Oh-seok, said in a separate meeting with banking executives that the country is “monitoring the market flows,” adding that “we mustn’t be agitated by every positive or negative movement.”

In South Korea, the finance ministry directs currency policy, and the central bank acts on its behalf.

The comments helped push the won lower Friday. The currency weakened 0.4% to 1055.2 won to the dollar, and it was off 0.5% to 10.070 won against the yen.

While the South Korean central bank regularly intervenes in the foreign-exchange market to help smooth out volatility and in October bought some $2 billion to slow gains, the comments Friday indicated an increase in concern.

The won’s strength stands South Korea in contrast to many other emerging economies, where steep slides in foreign-exchange rates have become a point of concern for policy makers.


Central banks in Turkey and Brazil have intervened regularly in the foreign-exchange market to support their currencies, and Indian policy makers last year took a variety of steps to shore up the Indian rupee after it hit record lows. Excessive currency weakness can exacerbate inflation and put central banks under pressure to raise interest rates at a time when many emerging economies are struggling to expand faster.

Analysts expect Samsung to report a drop in operating profit when the company reports quarterly earnings Tuesday, in part because the strong won has driven up expenses.

“Samsung Electronics Co. is paying close attention to global foreign-exchange trends and is responding to [potential] currency risks by diversifying its currency portfolio,” a company spokeswoman said without elaborating.

Analysts say the won is unlikely to give up ground soon. Credit Agricole SA expects the currency will strengthen further against both the dollar and yen in 2014, forecasting that it could reach 8.87 won against the yen by December.

Separately, the euro dropped below $1.36 against the dollar Friday for the first time since Dec. 5. The common currency was the best-performing major currency in 2013 but has given ground in recent days as expectations of a relatively healthier U.S. economy have prompted investors to return to the dollar. The U.S. currency also rose 0.7% against the Swiss franc and 0.1% against the pound.

However, the greenback dropped against the Australian dollar, with Australia’s currency reaching a three-week high.

About bambooinnovator
Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (, the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

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