U.S. dollar weakening mitigates Korean exports recovery

[Graphics by Song Ji-yoon]

The U.S. dollar weakening poses as a damper on the recovering South Korean exports pivotal to generate growth for Asia’s fourth largest economy after a negative growth last year.

The country’s overseas shipments in January increased 11.4 percent from the same month a year ago to $48 billion won, according to the Ministry of Trade, Industry and Energy data. But in Korean won, the exports value stopped at 52.7 trillion won, up just 5 percent on year.

Based on the U.S. dollar, the nation’s exports grew 4 percent on year in November and 12.6 percent in December, but in Korean won, they actually fell 0.4 percent in November and increased just 4.8 percent in December.

Profitability has been hurt for Korean exporters as the result the Korean won’s strengthening versus greenback.

The U.S. dollar that averaged at 1,228.7 won in May last year slipped to 1,095.1 won in December. It hovered at 1,117.50 won as of 12:33 p.m. on Tuesday. Big exporters cite 1,133 won in exchange rate as the breakeven point and 1,167 won to make money.

Businesses have been less affected by the foreign exchange fluctuation than in the past due to the increased production in overseas and of intermediary goods, but it still plays a huge role in determining exporters’ business performance.

According to a survey conducted by Korea International Trade Association (KITA) in November last year on 801 local exporters, more than 65 percent worried that the strong won would result in weak export earnings.

[ⓒ Maeil Business Newspaper & mk.co.kr, All rights reserved]