Prolonged won weakness weighs on Korean firms, banks

According to the Seoul foreign exchange market, the won has hovered around the 1,500-per-dollar level since mid-May, fluctuating around the psychologically important threshold as foreign equity outflows offset strong stock market gains and a large current account surplus. This lifted the second-quarter average exchange rate to 1,501.6 won, its highest quarterly level since the Asian financial crisis in 1998. The won briefly strengthened on Friday, with the won-dollar exchange rate ending onshore trade at 1,478.5 per dollar, its lowest close since May 11, when it finished at 1,472.4. The rate saw little change on Monday, closing at 1,478.4. A weaker won is creating winners and losers across industries. Manufacturers that rely heavily on imported raw materials and components are facing higher production costs, while companies with foreign currency-denominated debt are shouldering heavier repayment burdens and greater exposure to translation losses. The airline industry is especially vulnerable because key costs such as aircraft leases and fuel are denominated in U.S. dollars. Shipping com