[Editorial] Slump in Foreign Exchange Rate
The foreign exchange rate has taken on a negative outlook. The won-dollar exchange rate fell by 7.9 won and closed down at 916.40 won yesterday on the foreign exchange market. An approach to 910 won has not come about in a period of nine years and one month. With such movement, prospects are likely that the 900 won rate will soon be reached. As a matter of course, a decline in exchange rates can provide benefits such as the value of won currency will rise and industrial competitiveness will be profitably reinforced in the long-term. However, when the speed of the depreciation is extremely rapid, a great concern will be aroused over the whole economy.
An immediate fall in the competitiveness of export businesses will occur, and payability will be put on emergency alertness. The average break-even point in exchange rates for domestic export companies is around 948 won, which means that quite a number of export businesses will move into the red and cannot make both ends meet under the current rate. It is not too much to say that the country lives on exports, considering it broke through 300 billion dollars this year. The deterioration of export payability will obviously aggravate the country’s balance of current accounts. Furthermore, it might complicate business investment and hiring, and instigate stagnation of business activities.
The problem is said to be that it is hard to take immediate measures as the sharp decline is a global situation that is accompanied by a bearish trend of the dollar. Foreign exchange authorities, which have adequately intervened in the radical exchange fluctuations all the while, are also just following the evolution of events for the moment. Even so, it is not acceptable to just watch over the movement of an additional decline in rates. Firstly, the authorities should try to restrain the psychological dumping by businesses that are shocked by the radical fall of rates. Moreover, they have to intensify the supervising system to avoid speculative influences that can incite an additional fall.
As it has been pointed out several times, it is important for export businesses to prepare appropriate plans rather than merely observing the foreign exchange market in order to gain security against radical fluctuations through a hedge strategy. The decline of foreign exchange rates should no longer elicit such comments as ‘exchange rate nightmare’ or ‘export chaos’.
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 / 입력시간: 2006. 12.08. 10:08
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