SEOUL, Jan. 17 (Xinhua) -- Sharp ascent of the South Korean won against the U.S. dollar over the past year will weaken competitiveness of local exporters compared with Chinese and Japanese rivals, which is in turn feared to drag down the export- driven economy, a local think tank said Thursday.
According to the report by Hyundai Research Institute (HRI), South Korea's exports were estimated to reduce by 0.92 percent if the won/yen exchange rate falls 1 percent. The 1 percent fall in the won/yuan rate was estimated to decrease the country's exports by 0.59 percent.
The estimated fall was based on the fact that South Korean exporters are competing fiercely with Chinese and Japanese rivals in many sectors.
The Ministry of Knowledge Economy said that the continued fall in the won/yen exchange rate would dampen export competitiveness of South Korea, especially in the industries of automobile, auto parts, general machinery and steel where local and Japanese firms are fiercely competing to survive.
The persistent appreciation of the won versus the Chinese yuan would also hurt export competitiveness of various South Korean industries such as shipbuilding, textile, plastic and LDS panels, the ministry said.
The South Korean won rallied 8.5 percent against the dollar over the past year thanks to continued trade surplus, solid economic fundamentals and sovereign credit rating upgrades, the HRI said in a report.
The Japanese yen dropped 16.2 percent to the dollar over the past year due to quantitative easing by the central bank and trade deficit, leading to a 26.1 percent plunge in the won/yen exchange rate.
The Chinese yuan appreciated 1.5 percent versus the dollar over the past year, but faster ascent of the won led to a 6.9 percent drop in the won/yuan exchange rate.
The think tank noted that South Korea's FX authorities should prevent the won/yen exchange rate from dropping sharply through smoothing operation and market stabilization measures to ease excessive volatility in the market.
It recommended that local exporters should make efforts to secure non-price competitiveness such as brand value, marketing and product quality enhancement.