SK Hynix's American Depositary Receipts (ADRs) have been listed, drawing attention to their potential impact on the foreign exchange market. There is speculation about whether the influx of dollars will stabilize the won-dollar exchange rate.
On July 10, the exchange rate of the Korean won against the U.S. dollar was reported at 1,501.4 won, down 4.7 won from the previous trading session, as of 3:30 PM in the Seoul foreign exchange market. The rate had dropped to the 1,490 won range on July 8 but fluctuated in the 1,510 won range before gradually declining throughout the day.
The recent drop in the won-dollar exchange rate, which had previously threatened to reach 1,560 won, is partly attributed to expectations of increased dollar supply following the listing of SK Hynix ADRs. The ADRs began trading on the Nasdaq Global Select Market on July 10 (local time), with SK Hynix raising a total of $26.57 billion (approximately 40 trillion won).
While there are hopes for a significant influx of dollars, analysts suggest that the expectations surrounding the ADR listing have already been largely priced into the foreign exchange market. On July 8, the won-dollar exchange rate plummeted to 1,498.5 won, dipping below 1,500 won for the first time since late May, driven by foreign selling of ADR-related futures and net foreign purchases of stocks.
On July 9, the exchange rate rebounded to the 1,500 won range due to bargain hunting following the previous day's drop and geopolitical uncertainties surrounding the Strait of Hormuz. On the day of the ADR listing, the exchange rate remained in the 1,510 won range without further declines.
This year, foreign investors have sold approximately $90 billion worth of domestic stocks, which has heightened expectations for the ADR. Although the size of the ADR is insufficient to offset all foreign capital outflows, it is expected to alleviate some pressure on dollar supply.
Market analysts note that since much of the ADR anticipation has already been factored in, future exchange rate movements will still depend on U.S. monetary policy, global dollar trends, and foreign investment patterns. With the recent easing of foreign rebalancing efforts and the added factor of significant dollar supply, there are projections that the exchange rate may decline in the second half of the year.
The Bank of Korea also anticipates a reduction in the scale of foreign net selling in the domestic stock market as the year progresses. Bank of Korea Governor Shin Hyun-song stated the previous day, "Considering the large current account surplus, there is a significant possibility that the won will strengthen."
Park Sang-hyun, a researcher at iM Securities, commented, "The nature of foreign net selling in the third quarter is expected to stabilize somewhat, contributing to alleviating dollar supply concerns. Subsequently, the exchange rate will fluctuate in line with economic fundamentals." He added, "Given the visibility of disinflation and the expected resolution of uncertainties surrounding Federal Reserve policy, the exchange rate is projected to fall to the mid-to-late 1,400 won range in the third quarter."
* This article has been translated by AI.
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