The Korea Herald

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Companies fear loss in profit on won ascent: poll

By 신용배

Published : May 25, 2011 - 19:36

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A majority of Korean businesses believe their earnings will worsen this year due to the local currency’s ascent against the U.S. dollar, a poll showed Wednesday.

According to the survey by the Federation of Korean Industries, 55.9 percent of respondents said the local currency will likely trade at a band of 1,000 won to 1,050 won to the greenback this year, up from the 2010 average of 1,156 won.

The average of all respondents came to 1,082 won to the dollar, according to the largest business lobby in Korea. The survey was conducted on the country’s 600 largest companies.

The local currency’s appreciation means companies here will make less profit from their exports, which account for more than 60 percent of the country’s gross domestic product.

Of the respondents, 51.9 percent said their operating profit will drop if the Korean won appreciates more than 10 percent, with 21.1 percent of them saying their operating profit will dwindle up to 2 percentage points.

The survey showed the companies are also concerned about a possible rise in interest rates, which could further undermine their profitability by driving up their borrowing costs.

More than one out of every three, or 37.7 percent of respondents, said the country’s benchmark interest rate will likely rise to 3.5 percent this year, while 36.7 percent answered the current rate of 3 percent is most favorable to them. 

(Yonhap News)