Weakening Won Poses New Risks to South Korea

The weakening of the won in recent weeks carries both benefits and risks for the South Korean economy that is being held back by a simultaneous downturn in investment, consumption and exports, Yonhap reported.  Policymakers therefore face a thorny task to take proper steps in response to the weakening won that is set to have contradictory effects on the economy. The value of the Korean currency against the dollar fell to an eight-month low of 1,124.2 won per dollar in the Seoul foreign exchange market on June 28 before rising somewhat to 1,114.5 won the following day.  Over the previous 14 trading days, the won lost its value against the greenback by 5.1%. Under usual conditions, the depreciation of the won can be seen as bringing more positive than negative effects to Korea’s export-dependent economy by enhancing the price competitiveness of the country’s exporters. What is concerning, analysts note, is the steep pace with which the won has been weakening.