SEOUL-- The government on Sunday said it will lower premiums on foreign exchange rate risk insurance for small and medium-sized enterprises (SMEs) that are being hurt by the sharp appreciation of the Korean won against the U.S. greenback.
The Ministry of Trade, Industry and Energy said it will expand support for companies starting Monday, with the insurance discount rates of 50 percent being provided compared with 20 percent at present.
The won has recently risen sharply in the past few trading sessions, which can pose challenges for exporters. The exchange rate stood at 1,097.5 won against the U.S. dollar Friday, up 3.9 won from the previous session's close.
In addition, the upper limit for repayment for those that use the put spread option will be raised to US$3 million from just $1 million at present.
The ministry said that it plans to hold meetings across the country in November and to inform SMEs of changes planned.
Seoul is moving to help local companies deal more effectively with the U.S. Federal Reserve's expected move to raise rates in December.
"The effects of the foreign exchange on the country's key export items made by big companies are practically nonexistent, yet SMEs can feel the pinch with the government trying to reduce the fallouts," a senior ministry official said.
Related to the rise in the Korean won, the Hyundai Research Institute claimed that the South Korean economy can bear an exchange rate of 1,184 won to the dollar. It, however, warned that if the local currency rises above this level and if the exchange rate is sustained, Asia's fourth-largest economy may experience complications in terms of trade.
Source: Yonhap News Agency