SK Hynix's recent dollar conversion from its U.S. stock listing has sparked a wave of dollar sales among domestic companies. As the won strengthens due to increased dollar supply, the government is accelerating efforts to encourage exporters to bring overseas funds back home and convert them into won.
According to Bloomberg on July 27, SK Hynix raised $26.5 billion (approximately 38.8 trillion won) through its American Depositary Receipt (ADR) listing. ADRs allow foreign companies to trade their shares on U.S. exchanges.
It is reported that SK Hynix has converted some of the dollars raised into won, contributing to the appreciation of the won in the foreign exchange market.
Steven Lee, an economist at Meritz Securities, noted, "The movement initiated by SK Hynix has spread to dollar sales across various companies. As the won continues to strengthen, firms that had delayed converting foreign currency earnings have started selling dollars."
The won has appreciated by about 6% against the dollar this month. After being the weakest among major Asian currencies in the first half of the year, the won recorded the second-highest increase in Asia in July.
Despite foreign investors net selling approximately 13.6 trillion won in the KOSPI market this month, domestic companies' dollar sales have partially offset the downward pressure on the won caused by foreign capital outflows.
Hanwha Ocean is also reported to have sold about $2 billion (approximately 2.9 trillion won) in dollar forward contracts earlier this month. Market speculation suggests that Hanwha Ocean may engage in further sales.
Forward contracts allow companies to sell dollars they expect to receive in the future at a predetermined exchange rate, helping to mitigate the risk of a decline in the won's value against the dollar, which would reduce the won value of export revenues.
According to the Bank of Korea, domestic exporters and importers sold $17.4 billion (approximately 25.4 trillion won) more in forward contracts than they bought in the second quarter, marking the largest net sale in 18 years.
The government is also leveraging exporters' dollar sales to stabilize the won's value. Heo Chang, the second vice minister of the Ministry of Economy and Finance, met with representatives from major exporting companies last week, urging them to actively convert export revenues and foreign currency deposits, and to facilitate the inflow of overseas retained earnings into the domestic market.
Participants in the meeting included representatives from Samsung Electronics, SK Hynix, Hyundai Motor, Kia, HD Korea Shipbuilding & Offshore Engineering, Hanwha Ocean, and Samsung Heavy Industries. The government also requested these companies to expand measures to reduce exchange rate fluctuation risks, such as forward contract transactions.
Moon Ji-sung, the director of international economic management at the Ministry of Economy and Finance, predicted that corporate dollar sales would continue to increase in the third quarter. He remarked on the recent trend of dollar sales, saying, "This is not just a passing shower; it marks the beginning of a rainy season."
* This article has been translated by AI.
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