South Korea Posts Record Current Account Surplus

By William Sim

Nov. 27 (Bloomberg) -- South Korea posted a record current account surplus in October, which may help ease pressure on the won, Asia’s worst-performing currency this year.

The surplus was $4.91 billion last month, compared with a deficit of $1.35 billion in September, the Bank of Korea said in Seoul today. The current account is the broadest measure of trade, tracking goods, services and investment income.

“It’s a big surprise and will help support the won,” said Chun Chong Woo, an economist at Standard Chartered First Bank Korea Ltd. in Seoul. “The won-dollar rate seems to have reached its peak now.”

The won has tumbled to near a decade low as foreign investors dump emerging-market assets amid the global economic and financial crisis. South Korea has posted current account shortfalls every month but two this year as high oil prices and the weaker won drove up the cost of imported goods.

The finance ministry said on Nov. 25 it expected a current account surplus of more than $1.5 billion in October and about $1 billion in November.

South Korea may post a current account surplus of “$1 billion or more” in November, Yang Jae Ryong, a central bank statistics official, told reporters in Seoul today.

A surplus means there are more dollars flowing into the country than those going out, bolstering U.S. dollar supplies in the local currency market and strengthening the value of the won.

Currency Swap

The Korean currency fell 0.4 percent to 1,472.75 per dollar as of 9:43 a.m. Seoul time, ending two days of gains, on speculation importers will step up purchases of the U.S. currency to pay month-end bills. The currency is still down 37 percent since the end of June. The Kospi stock index rose 2.6 percent to 1,056.08.

The Bank of Korea said today it will receive $4 billion from the Federal Reserve, using its currency-swap line for the first time to provide U.S. dollars to local banks struggling to secure foreign funds.

The Fed agreed last month to provide $30 billion each to the central banks of Brazil, Mexico, South Korea and Singapore, expanding its effort to unfreeze money markets in emerging nations. South Korea is seeking to expand similar deals with China and Japan to help stabilize the local foreign-exchange market.

Trade Surplus

The trade balance turned to a surplus of $2.79 billion last month from a deficit of $890 million in September as imports slowed faster than exports, today’s report showed.

Total exports on a customs-cleared basis, which excludes ships, rose 8.5 percent in October from a year earlier, compared with a 27.7 percent gain in September. Imports jumped 10.4 percent compared with a 45.8 percent gain in September.

The shortfall on the services account, which measures the international flow of travel, transport costs and royalties, narrowed to $54.7 million from $1.24 billion.

The travel deficit turned to a surplus of $495.5 million as the weaker won and slowing economy discouraged people from taking trips.

South Korea’s income account, which tracks the flow of interest payments, investment income and wages, posted a surplus of $1.41 billion last month.

To contact the reporter on this story: William Sim in Seoul at wsim2@bloomberg.net