Steepest Drop
The value of the Korean currency fell by more than 6 percent with respect to the U.S. dollar this year as the strong dollar continued throughout the year ahead of the recent interest rate hike by the Fed. The devaluation was the steepest one since the global financial crisis of 2008.
Bloomberg announced on Dec. 23 that a total of 126 out of 149 countries around the world underwent home currency devaluation with respect to the U.S. dollar between Jan. 1 and Dec. 22 this year. The Korean won’s depreciation amounted to 6.3 percent during the period, and the rate of decline reached a seven-year high after a 26 percent fall in 2008. The percentage had been -3.8 percent in 2014, too.
In the meantime, the Japanese, Chinese, Taiwanese and Singaporean currencies lost 1.5 percent, 4.2 percent, 3.5 percent and 6 percent vis-à-vis the U.S. dollar this year, respectively. This is because Korea was more affected by this year’s decline in global consumption and more foreign funds flowed out of Korea due to the strong dollar.
Next year, the Chinese government is predicted to continue to devalue the yuan. Under the circumstances, Korean exporting firms competing with Chinese manufacturers are likely to face a heavier burden.