Korean won to stay weaker than profitable levels – poll

The South Korean won was expected to stay weaker than levels for corporate profits this year as the local currency was likely to stay under pressure from a slowdown in Asia’s fourth-largest economy and the sustained US monetary policy tightening bias, a survey of major companies’ chief financial officers showed.

The won was predicted to remain softer than the 1,200 per dollar level in 2023, said 86% of 50 CFOs of the country’s large companies with 14% of the total expecting the currency to weaken past the 1,300 level, according to The Korea Economic Daily’s poll published on Sunday.

Local companies saw the won’s appropriate levels at between 1,100 against the US currency and 1,200 to make profits, the central bank said. A weaker won than those levels raises costs more than the values of overseas sales, hurting operating profits, according to the Bank of Korea.

UNCERTAINTIES IN MARKETS, HAWKISH FED, SLOWER GROWTH

Last year, the won depreciated 6% to 1,264.5 versus the greenback. The South Korean currency had lost as much as 17.7% to 1,444.2 on Oct. 25, 2022, the weakest since the 2008-09 global financial crisis.

The local unit is expected to stay volatile in 2023 as the domestic financial markets are likely to keep facing uncertainties and the US Federal Reserve is predicted to raise interest rates further, hurting the currency.

South Korea’s economy is also slowing down. The majority of the survey participants forecast economic growth for this year to be lower than 1.5%, while only 8% expected the economy to expand by more than 2%.

The Bank of Korea said the economy may grow 1.7% this year, down from an estimated 2.6% in 2022. The finance ministry forecast this year’s growth at 1.6%.

Write to Kyung-Min Kang at kkm1026@hankyung.com
Jongwoo Cheon edited this article.