S. Korea to allow its currency's ascent: Barclays
By Kim Young-gyo
HONG KONG, Aug. 20 (Yonhap) -- South Korea will likely allow its currency to appreciate against the U.S. dollar for the rest of the year as it faces inflationary pressure amid steady economic growth, a British-based financial company said Friday.
"Given that monetary tightening will likely come in 'baby steps,' we believe rate hikes could be supplemented by a more rapid appreciation of the Korean won to ward off imported inflation pressures," Leong Wai Ho, an economist for Barclays Capital, said in a report.
Barclays said it is expecting the Korean won to rise as high as 1,075 against the greenback during the next six months and 1,050 during the next 12 months.
The South Korean currency closed at 1,183.0 won to the greenback on Friday, down 10.3 won from Thursday's close.
In an effort to curb rising inflationary pressure, the South Korean central bank raised its key interest rate to 2.25 percent from a record low 2 percent in July, ending the 16th straight month of a stand-pat run.
The rate hike heralded the start of South Korea's stimulus exit, and the Bank of Korea (BOK) is widely expected to hike borrowing costs once or twice within this year. A stronger won also helps curb inflation, as it would mean that South Korea can import foreign goods at cheaper prices.
The financial firm also said urgency to limit foreign exchange volatility is fading rapidly in South Korea.
"President Lee (Myung-bak) emphasized the need to do more to ensure that smaller companies and low-income Koreans are benefiting from the recovery," Leong said. "In our view, this reflects official thinking that exports have now recovered sufficiently."
"More importantly, a strong Korean won will benefit smaller companies more, given that they are more domestically focused for revenue," Leong said.
By Kim Young-gyo
HONG KONG, Aug. 20 (Yonhap) -- South Korea will likely allow its currency to appreciate against the U.S. dollar for the rest of the year as it faces inflationary pressure amid steady economic growth, a British-based financial company said Friday.
"Given that monetary tightening will likely come in 'baby steps,' we believe rate hikes could be supplemented by a more rapid appreciation of the Korean won to ward off imported inflation pressures," Leong Wai Ho, an economist for Barclays Capital, said in a report.
Barclays said it is expecting the Korean won to rise as high as 1,075 against the greenback during the next six months and 1,050 during the next 12 months.
The South Korean currency closed at 1,183.0 won to the greenback on Friday, down 10.3 won from Thursday's close.
In an effort to curb rising inflationary pressure, the South Korean central bank raised its key interest rate to 2.25 percent from a record low 2 percent in July, ending the 16th straight month of a stand-pat run.
The rate hike heralded the start of South Korea's stimulus exit, and the Bank of Korea (BOK) is widely expected to hike borrowing costs once or twice within this year. A stronger won also helps curb inflation, as it would mean that South Korea can import foreign goods at cheaper prices.
The financial firm also said urgency to limit foreign exchange volatility is fading rapidly in South Korea.
"President Lee (Myung-bak) emphasized the need to do more to ensure that smaller companies and low-income Koreans are benefiting from the recovery," Leong said. "In our view, this reflects official thinking that exports have now recovered sufficiently."
"More importantly, a strong Korean won will benefit smaller companies more, given that they are more domestically focused for revenue," Leong said.