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Korean currency (Won, KRW): how its facing the global recession and elevating liquidity?
Currency trading is the most important aspect of forex trading. Just like other currencies, even the Korean currency has its own established niche with respect to currency trading. But unfortunately, the ongoing global recession and the mushrooming liquidity crisis has caused a detrimental impact on the trading of the Korean currency.
Impact of recession on Korean currency
The fallout is taking a very brutal aspect in terms of the Korean currency trading. Some time back, the value of US dollar has been doubling against the respective value of the Won. In the beginning of 1997, the value of USD-KRW was 800 which thereby increased to 1600 by the end of 1997 just like the forex trade; even the stock marketing sector could not be left untouched. This thereby affected the economy of the Korea in a very detrimental manner.
Currently, the value of Won, the Korean currency has suffered a continuous low in the past three months. The slumping suffered against the dollar is the lowest one when compared in the history of past two and a half years. This has tremendously affected the sentiments of the forex traders and the investors.
But at the same time, the president of South Korea, Lee Myung-bak opined that foreign currency crisis could not materialize in Korea in any perspective. Though the conditions are continuously compared to 1997, some of the experts believed that circumstances this time are entirely different from those ten years back.
South Korean banks
In a major development, the South Korean bank is now turning to the Federal Reserve of United States for the need of funding. On the other hand, the Korea Development Bank has confirmed that it would sell around eight hundred and thirty dollars in the form of bonds worth of three months. At the same time, even the Kookmin bank, which is one of the top lenders, confirmed that it would also sell its bonds which are short dated.
Step to purchase domestic bonds
The conditions have presently deteriorated to such extent that the even the bank of Korea has publicly revealed its future step of purchasing the domestic bonds, which are sold by the local banks. This step is taken to expand the liquidity of local currencies. At the same time, the currency liquidity with foreign respective is one of the major problems faced by the Korean currency. At the same time, the increasing value for credit default swap in Korea has been fuelling to the loss.
There is tremendous decrease in the foreign investments in the trading sector thereby also affecting the impact of the currency conversions in the trading.
Turning to the instuitional buying, the consumer sentiment index of Korean currency, when calculated in six different categories, has witnessed a thorough fall to 88 in this October.
One of the market analysts from Samsung Securities revealed that after the pension lenders, the institutional buyers are the most important purchasers in the forex trading sector.
Position of Won in international market
In one of the recent quotations, even the national Pension service of Korea has declared that the Won is presently at its bottom most position in the international domain.
The entire down grading of Won has occurred due to the releasing of the 700 billion dollars bailout plan introduced by the U.S dollar at present. As a result, the US dollar is gaining its position in the forex trading and at the same time, many of the Asian countries, just like Korea is facing a tremendous impact.
Thus, it's indeed the necessity of the hour for the Korean economy to buckle up the position and vigorously work to uplift its quote in the currency trading.