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Strong Korean won casts cloud over economic recovery Updated: 2014-07-04 03:40:35 KST

  Strong Korean won casts cloud over economic recovery

This company exports clothing to around 10 countries like the United States and Japan.
It receives orders from foreign buyers around five months before it actually ships the products and the foreign exchange rate is not moving as they expected.

"Back then, we thought the local currency would be trading at the 1,100 level, but it's about to breach the 1-thousand level and we are taking a massive hit."

"It's local small-and medium-sized exporters like this one that remain vulnerable to the strengthening of the won, unlike large companies, which can dodge currency fluctuations by diversifying settlement currencies and raising overseas production."

The Korea Federation of Small and Medium Business says that nine out of 10 small- and medium-sized exporters saw their profitability drop in May due to the strong won.
The local currency has been continuing its appreciation trend since then.
Making matters worse is that the currency woes come at a time when domestic demand remains sluggish.
With Korea's economic recovery relying on a gradual, export-led process, experts say the strong won trend is casting clouds on the overall domestic economy.

"The won is the only currency that's strengthening among major currencies, while the global economy is not picking up pace, so the strong won trend could dent the nation's exports and eventually slow its overall pace of economic recovery."

Experts say what's most worrying is the pace of appreciation and point out that if it strengthens too fast local exporters won't have time to prepare for the change.
Hwang Ji-hye, Arirang News.
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