Current account surplus hits $4.2 billion last month

Korea’s current account surplus more than doubled last month over August, helped by strong exports of chips and automobiles, the Bank of Korea announced yesterday. It marked the eighth straight month of surplus.

The BOK said the surplus hit $4.2 billion in September, compared to a revised $1.91 billion in August.

The goods trade account reached a surplus of $5.45 billion last month, sharply up from a $3.33 billion August surplus, the central bank said. September exports were still down from a year earlier but the on-year contraction decelerated to 8 percent from 18 percent in August. The on-year contraction in imports eased to 24 percent in September from 32 percent.

When the BOK announced a surprisingly high third-quarter gross domestic product growth of 2.9 percent on Monday, it said conditions of Korean exporters’ overseas markets were improving faster than expected.

The service account posted a $1.63 billion deficit last month, which was less than the $1.79 billion August deficit. A reduction in overseas travel by Koreans contributed to the narrowing, the central bank said. “The current account surplus will be about $3 billion this month and the full-year amount might reach $40 billion, though changes in crude oil prices and foreign-exchange rates could affect the targets,” said Lee Young-bog, head of the BOK’s national account team. The current account surplus is adding to upward pressure on the Korean won.

But yesterday, the won weakened to 1,195.4 per dollar from 1,184.4 won, after the U.S. Conference Board on Tuesday reported an unexpected fall in that country’s consumer confidence, cooling optimism about an early recovery. However, the won has strengthened 23 percent against the dollar during the past 12 months, spurred on by Korea’s current account surplus and faster-than-expected economic growth.

“We expect to see outperformance of select Asian currencies with leverage to China, including the won, as strong economic fundamentals dominate,” said a research note yesterday from Societe Generale SA. The investment bank forecast the won could climb 11 percent against the euro, without giving a time frame.

A stronger won could be a burden on Korean exporters because it would make their products more expensive on the global market.

The Federation of Korean Industries said in a report yesterday that, if the local currency rises to 1,170 won per dollar on average in the third quarter, from the second quarter’s average 1,240.9 won, it would cut the combined revenue of the nation’s 30 biggest conglomerates by 5.7 trillion won ($4.77 billion).

By Moon So-young [symoon@joongang.co.kr]