Weakening won, oil prices magnify inflationary pressure

Lofty oil prices were always a threat but a fresh weakening of the won is threatening to magnify the threat to Korea’s economy, analysts say.

Although crude prices have been on a steady climb since last year, so has the won’s strength against the U.S. dollar, the currency of global oil transactions.

With fewer won needed to convert into dollars to pay for oil shipments, Korean companies have been able to blunt the impact of higher energy costs.

But now, with the won softening since early June, the weakening Korean currency combined with surging oil “can trigger cost-push inflationary pressure stemming from an increase in raw material import prices,” said Kwak Soo-jong, a senior researcher at Samsung Economic Research Institute.


Korea Herald