South Korea Takes a Hit from Currency

South Korea's Samsung Electronics warned that a stronger won could cut its operating profit by some $2.8 billion this year. Companies selling products outside of their home country prefer lower currency valuations, since it lowers the relative price of their products. But, a higher valuation can eat into profits, if prices are kept the same regardless of currency fluctuations.

Carmakers Hyundai Motors and Kia Motors also posted fourth quarter profit declines due to the won's appreciation. The widespread impact has some traders speculating that the country may join the so-called "currency wars" and take an active stance in reducing their currency's valuation along the same lines as Japan's new Prime Minister Abe Shinzo.