Korean currency is likely to further appreciate to the dollar next year: experts

SEOUL, Nov. 20 (Yonhap) -- The South Korean currency is likely to further gain ground against the U.S. dollar next year amid the underlying trend of the current account surplus, experts said Wednesday.

The won may trade in the range of an average 1,055 to 1,074 won to the greenback in 2014, according to a median forecast by major think tanks.

The won has appreciated 1.34 percent against the U.S. dollar so far this year. But the won sharply gained in the third quarter by rising 6.9 percent to the greenback as talks over the Federal Reserve's stimulus exit led investors to see the won as a safer asset.

Analysts said that the local currency may be additionally under upward pressure to the greenback amid the current account surplus run.

The Korea Institute of Finance said that the dollar may turn stronger next year due to the reduction in quantitative easing (QE) and the economic recovery, making currencies of emerging markets weaker.

"But as Korea has relatively strong economic fundamentals, impacts of QE may be limited on the won," it added.

The won's gain mainly results from strong economic fundamentals, but it could also unnerve policymakers as a potential sharp gain in the local currency is feared to sap exports. Local policymakers are also wary of a foreign capital influx as changes in external economic conditions could trigger an outflow of such cross-border funds.

Mindful of risks from one-sided behavior in the currency market, foreign exchange authorities said they are closely monitoring the markets, adding that they are ready to take actions if necessary.

"Currency volatility increased and it is worrisome that there seems to be one-sided behavior in the market," said an official at the central bank.

The remarks came as the government and the central bank made the first joint market intervention in five years on Oct. 24. They said that the won's recent movement is seen as "excessive," adding that they will take actions to curb herd behavior if necessary.

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