By Kim Jae-kyoung
Staff Reporter

The Korean won is forecast to continue appreciating against the U.S. dollar through the end of this year, due to the dollar’s overall weakness caused by rising deficits in the U.S. current account.

The forecast is a consensus view of a number of international investment banks that predict in their latest reports that the Korean currency will keep gaining value in line with the yen’s appreciation versus the greenback.

Barclays Capital expects the won-dollar rate to fall to 1,120 at the end of March and 1,080 won at the end of June, citing the large and growing balance of payments surpluses.

``The combination of very fast export growth and depressed private consumption makes for rising current account surpluses going forward,’’ Barclays Capital analyst Dominique Dwor-Frecaut said.

``Adding to growing current-account surpluses, capital account surpluses that add up to $12.3 billion between January and November in 2003 suggest very strong pressure on the Korean won,’’ shed added.

JP Morgan forecast the U.S. dollar will cost 1,140 won at the end of March and 1,100 won at the end of June. It expects the won-dollar rate to hover at 1,050 won in December.

Goldman Sachs predicts the won will appreciate to 1,110 won in March and 1,025 won in June. But its twelve-month forecast is 1,050 won.

Lehman Brothers forecast the rate will go to 1,120 won in March and 1,040 won in December.

Deutsche Bank expects the won to appreciate to 1,175 won in March, 1,150 won in June and 1,125 won in December.

Salomon Smith Barney (SSB) predicts the won will cost 1,170 won in March, 1,135 won in June and 1,100 won at the end of this year.

``Foreign investment banks attribute the stronger won to the dollar’s overall weakness triggered by the growing deficits in both current and fiscal accounts in the U.S. as well as the recovery of the Korean economy,’’ a Bank of Korea official said.

After reaching 1,200 won on Dec. 26 last year, the local currency steadily declined to 1,197.4 on Dec. 30, 1,195 on Jan. 2, 1,187 on Jan. 6 and 1,181.9 on Jan. 9 and 1,176.1 won on Monday.

But the won-dollar exchange rate rebounded to 1,179.5 won on Tuesday following government intervention in the market, the first increase since the beginning of the year.

``Foreign exchange market is testing the government’s commitment to intervention, as the key support of 1,170 is now getting closer,’’ Citigroup senior economist Oh Suk-tae said.

``Chances are that the government would repeat the strong intervention once foreign equity buying subsides,’’ he added, noting that the government will not allow the won-dollar rate to fall below the key support of 1,170.

But Oh pointed out that the government will eventually accommodate a certain degree of Korean won appreciation this year along with improvements in economic fundamentals.

kjk@koreatimes.co.kr