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On the 3rd, on the Seoul foreign exchange market, the won per dollar ended at 1,097.0 won, an increase of 3.8 won from the previous day’s closing price of 1,100.8 won. It has been 2 years and 6 months since the won per dollar has entered the 1,000 won range. On that day, an employee is sorting dollars at the counterfeiting center at Hana Bank’s headquarters in Euljiro, Jung-gu, Seoul. [이충우 기자]On the 3rd, the won per dollar rose to 1,097.0 won, breaking the ‘large figure (large digit)’ of 1,100 won. With the US stimulus measures and the anticipation of the Corona 19 vaccine, the preference for risk assets grew stronger, and dollar supplies spilled, and the 1,100 won line of defense, which was knew that it had been established by the exchange authorities, it collapsed. The intervention of the exchange authorities was insufficient to prevent the flow of the market. Experts predicted that the won per dollar could rise to the 1,040 won level in the first half of next year, as there is no particular dollar strength factor. As a result, a red light was lit in the business environment of exporters who receive immediate dollar payments.
On this day, in the forex market, offshore investors placed large sell orders, leading the won’s rise. One banking trader said: “The sales volume came out of the offshore market, but there was a feeling of weight to digest the volume,” he said. “The supply and demand factor also affected the won’s rise.” He added, “The 1,100 won level is a level that contains the will of the authorities, but there is real demand, so the price of the won has to go up.”
Externally, the greater appreciation of risk assets is attributed to the strong won (weak dollar). The Speaker of the United States House of Representatives, Nancy Pelosi (Democratic Party) and the Senator of the Democratic Party, Chuck Schumer, announced the first (local time) that they would negotiate on the basis of the 90.8 billion dollar stimulus plan proposed by both parties. Furthermore, Fed Chairman Jerome Powell said he would keep interest rates low until the risk of Corona 19 is completely gone. This means that the liquidity of the dollar released in the market will be maintained for the time being. This is the weakening factor for the dollar.
The first approval of the Corona 19 vaccine in the UK also affected the sentiment of preference for risk assets. The UK government approved the use of a COVID-19 vaccine developed by the US pharmaceutical company Pfizer and German Bioentech the day before.
Internally, global investors are rushing into Asian markets like Korea. Foreigners continue to buy net, mainly of semiconductor stocks such as SK Hynix and Samsung Electronics. Baek Seok-hyun, an economist at Shinhan Bank, analyzed: “Basically, the dollar has weakened and the revaluation of Korean won assets continues due to the improvement in export indicators and foreign investments in semiconductors.”
It appears that currency authorities are also focusing on preventing a sharp fluctuation or fluctuation in the won’s price rather than defending a certain level.
As the won continued to rise, there was an emergency for exporting companies. First, won-denominated sales and operating profit decline based on the year-end settlement results. Traditional manufacturing industries, where the operating margin is not high, are more shocked by the strong rise in the won. An official from an export company said, “The tipping point at the site is around 1,100 won to the dollar,” he said. “Although the year-end agreement has also been resolved, I am concerned that next year’s performance and management plan will be disrupted.” This means that beyond this year, there will be a setback in the overall management plan for next year. As a result of last month’s survey of 801 member companies with exports of more than $ 500,000 last year by the Korea International Trade Association, 26.7% of them cited exchange rate fluctuations as a problem that will affect the business environment next year. The exchange rate for their business plans for next year is 1,140 won per dollar on average, and only 9.2% of respondents made business plans with the expectation that the won will exceed the 1,100 won per dollar level. In particular, 54.7% of respondents said that even if the won is greater than 10%, it is not possible to adjust the price of the product, which is worrying about the deterioration of profitability.
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