Lee Min-hyung joined The Korea Times in 2014 and has worked as a journalist mainly in Korea’s finance, tech and automotive industry. He specializes in content creation, breaking news and in-depth analysis currently on transportation and mobility. You can reach him via mhlee@koreatimes.co.kr.
Korean currency expected to continue to weaken after Chuseok
By Lee Min-hyung
By Lee Min-hyung
The won-dollar exchange rate is forecast to rise further after the Chuseok holiday due to the U.S. Federal Reserve's hawkish pivot and the global energy crisis, analysts say.
They added that the dollar will continue gaining ground against the Korean won in the coming weeks, due to lingering multiple external risk factors as well as another giant rate hike by the Fed later this month.
The won-dollar exchange rate closed at 1,384.2 won per dollar Wednesday, up around 6 percent from a month ago. The rate ended at 1,306.4 won on Aug. 8.
Market analysts said the Korean won will continue to slump until the end of this year.
“The won's additional fall appears inevitable and the local currency will likely keep weakening its value against the dollar until the end of 2022 and then the exchange rate is expected to stabilize next year,” KB Securities analyst Kim Hyo-jin said.
The analyst pointed out that the soaring energy prices and the Fed's reiterated hawkish gesture would keep raising the dollar's value.
Kim Dae-jong, a professor of business administration at Sejong University, expects the exchange rate to reach as high as 1,400 won within this year.
“There is little external signal (of anything) that will help stabilize the soaring won-dollar exchange rate amid oil price hikes and monetary uncertainties,” he said. “My view is that the figure may continue to soar to around 1,500 or even 1,600 won per dollar next year. The government and financial authorities are advised to brace for the scenario immediately by taking measures accordingly ― such as the Korea-U.S. currency swap agreement.”
An electronic board set up at Hana Bank headquarters in Seoul shows a fall in the won-dollar exchange rate, Thursday. Yonhap
Overseas analysts also said the dollar will maintain its solid rally for some time.
“The dollar is probably close to a peak after its recent surge,” Oxford Economics lead economist Adam Slater said. “But several factors, including global liquidity conditions, are likely to remain dollar supportive for some time.”
The strengthening dollar pushed more foreign investors to engage in a selling spree of Korean shares.
According to data from the Korea Exchange, foreigners sold local stocks worth 765 billion won between Sept. 1 and 6. This is in contrast to their buying spree in July and August, during which they purchased Korean stocks worth 1.81 trillion won and 3.98 trillion won, respectively.
Shin Joong-ho, an analyst at eBest Investment & Securities, said that he fears a possible foreign exchange crisis will remain in place amid foreign investors' exodus sparked due to the soaring exchange rate.
“Another factor (that weakens foreign investors' sentiment here) is the diminished credibility of repeated remarks of relief from the Bank of Korea and the ministry of economy and finance,” he said.