The Bank of Korea said yesterday that South Korea's current account balance sustained a large deficit last month -- after posting the biggest shortfall in 11 years in January -- and will likely remain in deficit through next month.
The deficit in the current account -- South Korea's broadest measure of trade -- last month came in at US$2.35 billion, down from a shortfall of US$2.75 billion in January, the central bank said.
January's current account deficit was the largest since a US$3.13 billion shortfall in January 1997.
CURRENCY
Economists said the data point to further downward pressure on the South Korean won, giving the central bank less room to lower its benchmark interest rate to supplement the government's pro-growth policies.
"[The current account balance] for March and April isn't likely to escape from the recent deficit trend because of the expected foreign [repatriation of] dividend payouts," said Yang Jae-ryong, a senior manager with the balance of payments statistics team at the central bank.
Yang also blamed a sharp increase in crude oil imports for South Korea's recent current account deficits and hinted that the central bank's full-year target of a deficit of US$3 billion may widen. The new government expects a US$7 billion shortfall this year.
The US dollar was up against the won in yesterday's trading, largely on expectations of foreign fund repatriation related to stock-dividend payouts. Players were also wary that the still-high current account deficit could mean continuing outflows.
The US dollar traded at 990.60 won, up from Thursday's close of 987.80. The dollar hit a 27-month high of 1,032 won last week.
MIXED VIEWS
Economists' views on the current account outlook were mixed, with some expecting a sharp deficit this year and others predicting near balance.
Hana Daetoo Securities economist Kim Jae-eun said the central bank was unlikely to cut rates for now given the bearish won outlook.
Early this month, the central bank shifted to a new benchmark, the repurchase rate, but left the rate unchanged from the prior benchmark at 5 percent for the seventh consecutive month.
The rate was deemed appropriate to balance risks of inflation against those arising from a global credit crunch that stemmed from the US subprime mortgage crisis.
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