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Permalink Reply by Robert Eberenz on June 18, 2010 at 9:24am

This week the Econ Slice focused mostly on some "heady" macro-economic concepts that tug on exchange rates, as well as new policies aimed at reducing volatility. Many take an economists stance when discussing exchange rates, while others suggest that currencies are much more affected by geopolitical risks and events...

What do readers think about the Korean Won moving forward? Is the won going to appreciate and take comfort in the implied lower debt levels from the new futures trading cap? Or will the KRW fall on fears that the regulation will instead spark an exit from assets denominated in the currency?

Remember economics is only as strong as the perception of the market when it comes to handicapping financial markets...

Permalink Reply by Steven S. Bammel on June 19, 2010 at 4:17pm

From your article, I'm understanding that the causes of the recent depreciation in the Won include 1) amassing of foreign currency by the Korean government and 2) that foreign investors have been pulling capital out of Korea, partly in response to government restrictions on capital movement. Am I right?

Wouldn't Korea's excessive reliance on exports not be another factor in this? If the European economies tank, leading to shrinking markets for Korean exports in Europe and elsewhere, this would further add to depreciatory pressure on the Korean Won, no?

Permalink Reply by Blair A on June 20, 2010 at 4:59pm

Steven,

You are correct that if there was a significant decease in demand for Korean exports then the demand for the Won would also decrease therefore putting more depreciatory pressure on the Won. But unless European economies tank, which I don't think will happen, then the points highlighted by Robert are the main issues causing the headachs.