By Kim Yon-se
Staff Reporter


Should presidential hopeful John F. Kerry take the White House, the United States is expected to bring countermeasures against the Korean policymakers’ alleged intervention in the foreign exchange market to control the value of the won.

Above any other economic issue, a Kerry administration will likely initiate complaints about the won-dollar rate with the Korean government, predicted Mark Manin, an analyst at the Congressional Research Service, the public policy research arm of the U.S. Congress.

In a speech at a seminar hosted by the Korean Chamber of Commerce and Industry in the U.S. (KOCHAM) held in New Jersey on Oct. 27, Manin said Democrat Kerry has already mentioned the issue on Asian currencies through his campaign pledges.

In his election pledges, Kerry said Japan and China are manipulating their currency prices versus the dollar, adding that (the next government) would not tolerate this and would take serious action against such moves beyond mere symbolic measures.

Though the hypothetical Kerry government would focus on Japan and China, it would be difficult for South Korea to avoid the U.S. counteraction, Manin predicted.

Under the scenario in which Kerry becomes the victor, the Korean economy could be hit by weaker price competitiveness in its exports to America.

But many local analysts said there is a low possibility that Kerry will win the race. ``The Bush administration (in case of his reelection) may result in strong dollar policies, and the won-dollar rate may rise to 1,200 level,’’ said Lee Jin-woo, a futures trading researcher said.

Regardless of the outcome of the U.S. presidential election, there is a growing speculation that the Korean government has already become passive in the intervention of the global currency market.

Over the past few weeks, the Korean currency has been highly appreciated against the dollar.

After hitting 1,180.5 won on Jan. 26, the won’s value continued to rise this year, up (with the won-dollar rate dropping) more than 55 won to 1,125 won on Oct. 28, the strongest showing versus the dollar in four years.

A few local dealers said amid rising inflation and sluggish domestic demand, policymakers have no choice but to tolerate a subtle appreciation of the won against the dollar.

Analysts cited the nation’s current account surplus for the 17th consecutive month amid the growth rate of more than 20 percent in exports as one of the key factors for the falling won-dollar rate.

During the first three quarters of the year, a great quantity of dollars flowed into the nation on the back of strong exports, they said, while the dollar has been relatively depreciated against the won.

But now foreigners are selling Korean stocks aggressively. Dealers say the situation involving the won’s appreciation against the dollar amid the outflow of dollars cannot be regarded as normal.

While think tanks at home and abroad stress that maintaining a high level of foreign reserves is not a good way to prevent the won’s appreciation, it is of great concern what foreign currency policies would be taken by Korean policymakers after the Nov. 2 election.

At the end of September, South Korea was the fourth-largest holder of foreign reserves in the world with $174.4 billion. Japan had the largest with $831 billion, China with $483 billion (as of July), Taiwan with $233 billion and India with $118.8 billion.

According to the Bank of Korea, the nation’s foreign exchange reserves continued to rise over the past few years _ $121 billion in December 2002, $155 billion in December 2003, $167 billion in June 2004 and $174.6 billion as of October 15.

kys@koreatimes.co.kr