South Korea’s currency won might become one of safe-haven currencies as the global demand for Asian currencies rises, according to a local expert.
“The global demand for safe-haven assets overwhelmingly outweighs the supply, and thus increasingly more investors are turning to safe-haven currencies as their preferred choice,” said a director at the Korea Center for International Finance (KCIF) during his presentation on the prospect of the global economy and financial market next year at a forum held at a hotel in Seoul. As a result, he said, the demand is increasing for Asian currencies such as the Korean won. Central banks around the globe have recently raised shares of other foreign currencies (Australia, Korea, Malaysia and Singapore) than the US dollar and the euro to five percent or higher in their total foreign exchange holdings, according the analysis by the KCIF.
“If the won becomes recognized as one of safe-haven currencies, it would produce positive effects such as reducing fluctuations in the won-dollar foreign exchange (forex) rate and foreign capital flows to and from the local market. On the other hand, it could impose burden on Korean exporters’ competitiveness,” he said. As for the won-dollar exchange rate, he predicted that a future decline in the forex rate would be limited despite the expectation the forex rate would continue to fall. The prediction is based on the recent pace of the falling forex rate that was faster than previously estimated, he said.
[Written by Duck-joo Lee - Sun-ah Kim / edited by Soyoung Chung]
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