By Choonsik Yoo
SEOUL, Oct 7 (Reuters) - South Korea believes the won willbe in an "extraordinarily" balanced state for a considerableperiod and is determined not to intervene to weaken it to boostexports, top policymakers told Reuters.
Exports and imports both fell in September from a yearearlier, although not as sharply as markets had expected,supporting views the central bank will cut interest rates againthis week.
But the officials said exports were more resilient thanheadline numbers indicated, noting for example that fewerdeliveries of big-ticket items such as new ships could skew thedata.
Recent monetary policy easing in major economies will notlikely cause heavy capital inflows, they added.
The won has firmed nearly 4 percent against the U.S.dollar so far this year, but is still cheaper than thecurrencies of its trade rivals such as Japan and China whenmeasured over a longer period, and the current account is firmlyin surplus, they said.
The remarks, made in recent weeks on separate occasions,came amid further signs of weakening domestic demand in SouthKorea, even as external demand continued to deteriorate in theface of Europe's long debt crisis and a slowdown in China.
"That will do more harm than good," Finance Minister BahkJae-wan told Reuters recently, when asked if he would seek toweaken the won to boost exports, while describing the won asbeing in an extraordinarily balanced state.
"On one hand, we have the mission of entering into anadvanced economy's status. We have to enter into an advancedeconomy's status and (regarding that) there is an issue ofimbalance between domestic demand and exports," he added.
<^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^ Graphic on won's value: Graphic on trade dependency: Recent stories on South Korean economy ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^> WON ALREADY CHEAP
The won ended local trade up 0.2 percent at 1,111.3 perdollar on Friday, bringing its gains so far this year to 3.6percent against the dollar and 6.2 percent against the yen interms of the cross rate .
But compared to five years ago, the won's value measured inreal, trade-weighted terms is more than 40 percent cheaper thanthe yen and about 30 percent cheaper than the Chinese yuan, Thomson Reuters Starmine data shows.
South Korea is in fierce competition with Japan and China inmajor export markets for products ranging from cars and ships toelectronics and industrial machinery, and policymakers oftenface domestic political pressure to keep their currencies weak.
An International Monetary Fund official told Reuters aftermeetings with South Korean authorities last month that officialsin Seoul agreed the won was modestly undervalued and would notprobably seek to weaken it further.
"We had this discussion with the authorities and (they)agreed the won is moderately undervalued," Hoe Ee Khor, theIMF's assistant director of Asia and Pacific Department, said inan interview at that time.
South Korean exports for January-September fell 1.5 percentfrom the same period a year earlier, but would have posted again without the reduced ship deliveries and relocation abroadof some mobile phone production lines, government data shows.
Fewer new ships are being delivered due to the shippingmarkets' slump several years ago, which reduced the number oforders.
"Exports are not so weak in fact, and a weaker won would dolittle to boost exports in this environment," said one financeministry official, while refusing to be identified.
(Editing by Kim Coghill)
Keywords: KOREA ECONOMY/FOREX