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Won's strength has less negative impact on Korean economy: report

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(Globalpost/GlobalPost)

SEOUL, Oct. 24 (Yonhap) -- The local currency's gain to the U.S. dollar has exerted reduced negative impacts on the South Korean economy, a report showed Thursday, indicating that the pursuit of a weaker won may not necessarily be good.

The report by the Woori Finance Research Institute showed that usually the won's gain dents Seoul's exports, but as imports of capital and consumer goods are on the rise, the won's strength has reduced the value of expenses, increasing real purchasing power.

A stronger won generally erodes the price competitiveness of exports as it makes prices of Korean goods more expensive in overseas markets.

"The won's appreciation to the dollar negatively affects the Korean economy. But compared with the past, such negative impacts have eased on the local economy due to several factors like changes in industrial structures," the report said.

Exports account for about 50 percent of the Korean economy, but at the same time, Korea has increasingly imported capital goods as intermediary for overseas shipments.

As of 2011, imports of consumer goods accounted for 7.5 percent of consumer spending and government spending, up from 3.9 percent in 1995, the institute said, citing data from the central bank.

Imports of capital goods accounted for 14.4 percent of the total investment from the private sector and the government in 2011, up from 10.4 percent in 1995.

The report came as the local currency has appreciated 1.4 percent against the greenback so far this year amid an influx of foreign capital and brisk exports.

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http://www.globalpost.com/dispatch/news/yonhap-news-agency/131024/wons-strength-has-less-negative-impact-korean-economy-report