Itaewon, the popular entertainment district outside the U.S. Army's Yongsan Garrison where many U.S. troops spend their South Korean won, is packed Friday with the usual mix of South Koreans, members of the U.S. military community and foreign tourists. (Ashley Rowland / S&S)
The dollar reached a two-year high against the South Korean won Friday, despite its continuing fall against most of the world’s major currencies.
The dollar climbed to a 982.40 won commercial rate in currency markets Friday, matching levels last seen in February 2006.
In November, the dollar dipped to just more than 900 won before rebounding and remaining in the 940 won range until about two weeks ago.
Some currency market analysts in South Korea told Stars and Stripes last week that they believe the dollar’s surge has a little more steam left in it, but it won’t last past summer.
“This strong dollar trend against the won is highly likely to continue for the first half of this year, but we predict that the dollar rate will be dropping a little by the end of this year,” Jang Jae-chul of the Samsung Economic Research Institute said during a phone interview.
The dollar’s gains in South Korea run contrary to global trends.
Recession fears and steep cuts in interest rates have weakened the dollar in recent weeks against most major world currencies.
The dollar continues to set new record lows against the euro, has lost 17 percent of its value against the Japanese yen since May and is now worth less than 50 cents against the British pound.
So why is the dollar bucking the trend in South Korea? Financial experts say the most likely explanation is a combination of investor flight and slower South Korean economic growth projections.
Unlike established markets such as Europe or Japan, South Korea is considered a relatively stable “emerging market.”
In times of global economic turmoil, many investors look for less risky ground in large, established markets.
“Therefore, you want to retrieve investments from the South Korean market by completely selling off, rather than continuing to invest,” said Park Hae-sik, research fellow at the Korea Institute of Finance. “The dollars are getting pulled heavily out of the Korean market, and that is triggering the Korean won to drop rapidly.”
Both Park and Jang said analysts expected a small drop in the won’s value this year, but they say no one anticipated the steep drop of the past two weeks.
Even with the dollar’s recent gains, the won has been gaining sharply throughout the decade. Five years ago, one dollar bought 1,250 won.
Soldiers at Camp Red Cloud said Friday they welcomed the dollar’s recent gains but were still concerned about the shaken economy and high fuel prices they would be going back to in the United States.
Sgt. 1st Class Devon Richards of 2nd Infantry Division headquarters said those worries keep him from spending much money on non-necessities in South Korea. But if the dollar keeps up its present trend, that may change.
“If I can get more for my dollar, yes, I’ll definitely shop off post more," Richards said.
