By Cynthia Kim and Jihoon Lee
SEOUL, Jan 21 (Reuters) – South Korean authorities expect the won to strengthen to around the 1,400-per-dollar level in a month or two, although domestic policies alone will not be able to stabilise foreign exchange markets, President Lee Jae Myung said on Wednesday.
Lee also said the domestic stock market, which emerged last year as the world’s best performer with a 76% jump, was still undervalued.
“According to relevant authorities in charge, it (the dollar-won exchange rate) is expected to fall to around 1,400 after a month or two,” Lee told a press conference.
The won turned higher after Lee’s comments to strengthen as much as 0.5% to 1,468.8 per dollar, after touching earlier in the session its weakest level since December 24 at 1,481.4.
“The dollar-won rate fell sharply as traders unwound long dollar positions on the president’s comments,” one local currency trader said.
South Korean authorities have rolled out various policy measures since late last year to support a currency hovering around 16-year lows, saying the recent depreciation was not in line with economic fundamentals.
Lee said domestic policies alone would not be sufficient to reverse the recent depreciation in the won, as it was somewhat correlated with weakness in the Japanese yen, adding that the won was faring comparably better.
“We will continue to make efforts to find sustainable policy tools to stabilise exchange rates,” Lee said.
TACKLING KOREA DISCOUNT
On the stock market, Lee said it was still undervalued, though some of the factors contributing to the so-called “Korea Discount”, such as national security risks, domestic politics, corporate governance and market practices, were being resolved.
The Korea Discount refers to a tendency for South Korean stocks to trade at lower valuations compared with global peers due to factors such as opaque corporate governance structures and low dividend payouts.
The benchmark KOSPI has risen 15% so far this month, led by a rally in chip companies and automakers on optimism around artificial intelligence technologies, after last year posting its best performance since 1999. The index was little changed at around 4,880 points on Wednesday, erasing early losses.
“It is now looking at surpassing 5,000 on something we couldn’t foresee. That is, the boom of artificial intelligence and semiconductors at an unpredictable scale,” Lee said.
(Reporting by Cynthia Kim, Jihoon Lee and Youn Ah MoonEditing by Ed Davies)
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