Tuesday in Asia, the South Korean won climbed to a 2-1/2 -month high against the yen as the South Korean government approved an extra budget of 28.9 trillion Won today to revive Asia's fourth-largest economy in the face of a global recession.
Minister of Strategy and Finance Yoon Jeung-hyun, who had forecast the export-dependent economy could shrink two percent in 2009, said the extra spending should add 1.5 percentage points to growth.
The ministry will submit the supplementary budget totalling 28.9 trillion won ($21 billion)-equivalent to 10 percent of the budget already set for this year- to parliament by the end of this month. The amount includes 17.7 trillion, or about 2 percent of annual GDP, in new spending. The rest will make up for a shortfall in tax revenue due to the economic slump.
Meanwhile, in a meeting with the local business leaders and economic analysts, the Minister for Knowledge Economy stated that, based on the preliminary report from the Korea Customs Service, trade surplus for March is likely to reach $4.5 billion, due to a much sharper decline in imports than in exports during the first 20 days of the month. The data accentuates the weakness in the domestic economy.
The stock market in South Korea opened strongly today, taking cues from Wall Street, where the indices closed sharply higher after the Obama administration unveiled plans to help banks sell toxic assets. The benchmark KOSPI Index in South Korea opened higher at 1,226, compared to its previous of 1,199, and is currently trading at 1,212, up 1.02% or 12.22 points.
The South Korean won traded higher against the Japanese yen during early deals on Tuesday. The yen-won pair that closed yesterday's trading at 14.2545 reached 14.0335 at 1:45 am ET. This set a 2-1/2-month high for the won. If the Korean currency advances further, it may likely target the 13.69 level.
The board members of the Bank of Japan suggested that the Japanese economy may begin to recover from the current recession in the second half of this year at the earliest, minutes from the February 18 and 19 monetary policy meeting revealed today.
The members also said that they may need to cut their view of Japan's long-term growth - especially since there was more demand than expected for BoJ funds. The board also said that an exit strategy was needed for the series of economic stimulus measures.
The won has been in an upward channel against the yen after it reached a new multi-year low of 16.3395 on March 03. Since then, the Korean currency has appreciated 14%.
Against the dollar, the South Korean won rose to a 6-week high of 1376.20 by about 8:05 pm ET Monday. Thereafter, the won pared its gains and showed choppy trading. Currently, the dollar-won pair is worth 1384.85, compared to yesterday's New York session close of 1387.10.
Yesterday, the Obama administration released details of its latest plan to solve the massive, debilitating banking crisis that continues to hold the financial system in its crushing grip.
Treasury Secretary Timothy Geithner said his department plans a program to help investors buy up the toxic assets through a combination of $100 billion in TARP funds and private investment. The program is designed to boost current efforts that have largely been unsuccessful in unfreezing the credit markets and promoting consumer lending.
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