Asian nations and their manufacturers have been suffering through the European debt crisis as well as European governments.  Unfortunately, the sentiment has continued – as South Korea posted its first trade deficit in just over two years.  The report seems to have had limited effect on the country’s currency – the won – which currently trades at 1,123.45 against the US dollar on the session.  However, the current economic downturn has some in the market worried that a sustained slow down could hurt the chances of the South Korean won appreciating any further.

According to the country’s economic ministry, South Korea’s overseas exports dropped by a whopping 6.6% in January – compared to a more optimistic 10.8% gain in December.  Exports in the month fell to $41.8 billion, with imports rising by 3.6% to an enormous $43.5 billion.  The shortfall is the first for the economy since exports declined back in January of 2010.

Notably, the large decline in exports is being attributed to a drop off in demand in Europe, with shipments to the Eurozone plummeting by 45%.  Exports to China, US and Japan remained healthy – with shipments to the US in the area of 23%.

The ministry, in addition to noting the large decline in European demand, cited the Lunar New Year holiday as crimping the monthly schedule – and allowing for less working days in the month.  This has officials looking for a reversal in the figures, with a return to normalcy in February.

But, the trade picture isn’t the only thing that has raised trader brows.

Ministry data also showed that consumer prices have receded, declining to 3.4% annually.  The slowest pace since the beginning of 2011, the new pace of inflation is likely to delay any new rate hike speculation by the Bank of Korea – which has helped to fuel past won gains.