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Global currency tension likely to flare up this year: report
SEOUL, Jan. 24 (Yonhap) -- The global economy is likely to face intensified currency tension this year as major advanced countries' drive for powerful credit easing would hit emerging nations, a private think tank said Thursday.

   The Samsung Economic Research Institute said in a report that major advanced economies are pushing for economic policies at the expense of other countries, saying that their push for massive credit easing is putting upward pressure on the currencies of emerging countries.

   The report said that some developed economies are unleashing massive amounts of money to spur their fragile economies while delaying the timing of fiscal consolidation, raising fears about the emergence of "a currency war."

   "Global tension surrounding (their moves to weaken) currencies is likely to intensify," the report said.

   Succumbing to pressure by Japan's new prime minister Shinzo Abe, the Bank of Japan on Tuesday unveiled its plan for an open-ended asset-buying program from 2014 and doubled to its inflation target to 2 percent to defeat a spiral of deflation.

   The weakening trend of the yen makes South Korean products more expensive in overseas markets, raising concerns that South Korea's exports will be capped by the won's gain.

   The Korean currency rose about 20 percent per the yen last year, the strongest gain in 14 years. When the won-yen cross rate falls by 1 percent, South Korea's exports decline by 0.92 percent, according to a report by the Hyundai Research Institute.

   The Korea Center for International Finance also warned in its report that Japan's move could serve as a threat to the global economic recovery.

   It said that the global financial markets could be destabilized if countries like South Korea and China, who compete with Japan in overseas markets, jump on the bandwagon to curb the ascent of their currencies.

   "A chance of a global currency war is emerging as a threat to the recovery of the global economy," the report added.

   sooyeon@yna.co.kr
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