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Automobile industry

South Korean Exporters Wary of US Dollar's Decline

Strategic Insights

— 1 min read

South Korean exporters are closely monitoring the decline of the US dollar against the won, as a weak dollar makes their products more expensive in overseas markets. Exporters such as Samsung Electronics, LG Electronics, and Hyundai Motor are trying to minimize the impact of currency fluctuations on their earnings. A Samsung Electronics official said the company is trying to weather the currency impact even if the dollar/won rate goes as low as 900 won.

Key Takeaways:

  • Samsung Electronics is attempting to minimize currency risk by cutting dollar transactions and has predicted an average exchange rate of between 1,000 and 950 won per dollar this year.
  • LG Electronics is strengthening its monitoring of the currency market and studying how to hedge the currency risk, with the average dollar/won exchange rate set as low as 950 won.
  • Hyundai Motor is planning to expand local production at its plant in the US state of Alabama to cope with the dollar's fall and is also taking steps to increase its euro transactions.
  • A weak dollar is expected to slash Samsung Electronics' profits by 2 trillion won (US$2 billion) if the Korean currency gains 100 won against the dollar.
  • SK Corp. would gain 1.8 billion won if the dollar falls by 1 won, and owed $1.8 billion worth of debts as of the third quarter of 2005.
  • The weakening dollar is good news for Korean companies in the airline, oil refining, steel, shipping, and heavy machinery sectors.

Statistics:

  • The US dollar closed at 998.50 won Wednesday, down 6.90 won from Tuesday's close.
  • Samsung Electronics' predicted average exchange rate for this year is between 1,000 and 950 won per dollar.
  • The dollar/won rate is the lowest in almost eight months, with the dollar dipping below 1,000 won.
  • Hyundai Motor's planned local production expansion in Alabama and increased euro transactions could mitigate the impact of the dollar's fall.
  • SK Corp. owes $1.8 billion worth of debts as of the third quarter of 2005.

Sources:

  • Yonhap News Agency (Jan. 4)
  • Company statements from Samsung Electronics, LG Electronics, and Hyundai Motor.

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