South Korea's won will be 16 percent stronger on average this year as the currency's biggest loss in a decade revives exports and prompts intervention, according to Kia Motors Corp. and Korea Electric Power Corp, Bloomberg reported.
Kia, the nation's second-largest automaker, Kepco, the biggest power producer, and Korean Air Lines Co., the leading airline, are basing their financial projections on an average exchange rate of 1,200 per dollar, a gain of 16 percent from yesterday's close of 1,390. By contrast, Deutsche Bank AG predicts a 7 percent gain by the end of the year and UBS AG predicts a decline of 2.5 percent.
The won tumbled 26 percent in 2008, the most since the International Monetary Fund bailed the nation out in 1997 and the worst performance among Asia's 10 most-active currencies. South Korea's currency soared 41 percent in 1998, aided in part by a turnaround in overseas sales after the value of the won almost halved the previous year.
"What helped Korea stage a V-shaped recovery from the IMF crisis was the foreign exchange," said David Kim, head of Kia's treasury department in Seoul. "A stroke of good luck in the midst of misfortune is the won's weakness, which puts exporters at a price advantage. How to increase volume is now key."
Cho Hyun Jin, deputy head of the budget team at Korea Electric Power, known as Kepco, forecasts the government will intervene to ensure the currency strengthens. Higher fuel-import costs last year contributed to the biggest quarterly loss in the company's 26-year history.
"We don't see the government letting the won have a rough ride again, even though analysts are quite pessimistic on the outlook," Cho said.