South Korea's main engine of growth, the export sector, is being pounded by the rise of the country's currency against the US dollar, further overshadowing already gloomy consumer sentiment and driving down growth forecasts for Asia's fourth-largest economy.
The Korean won has led this year's rally of Asian currencies against the greenback, with a rise of 7.6 per cent since the end of September. The stronger won has eroded the competitiveness of the country's exporters, which have already been severely trounced by competition from China.
'Fifty per cent of South Korea's real [gross domestic product] is dependant on exports, so the effect of a rise in the value of the won is going to hit a lot of companies across the board,' Samsung Economic Research Institute economist Hwang In-seong said.
Technology firms and other leading companies which rely heavily on exports have seen their shares cut by the won's rise, prompting a rapid reassessment of business strategies on expectations of a continued US dollar fall.
Hyundai Motors public relations executive Jake Jang said: 'The rise of the won has given us more impetus to diversify our export markets, selling more vehicles to Europe, for example, to receive payments in euros. We are also carrying out a massive campaign to cut costs internally.'
The vehicle maker and its sister company Kia, which are paid in US dollars for 60 per cent of overseas sales, estimate a 10 won rise against the US currency would result in losses of about 200 billion won ($1.48 billion).
Analysts said the beneficial effects of a strong won for South Korean importers was likely to be offset by Korea's heavy dependence on exports.
