The won-dollar exchange rate, which fluctuated in the mid-1500s, has recently dropped nearly 7% over the past month. While sectors heavily reliant on energy and raw material imports are expected to benefit, export companies in industries such as automotive and electronics may see a decline in profitability due to reduced exchange gains during the conversion process. Concerns have been raised about the increased uncertainty in management caused by rapid exchange rate volatility.
On August 5, the won-dollar exchange rate closed at 1,424.50 won, down 8.0 won from the previous trading day. This marks a decrease of 111.5 won (7.3%) compared to the closing rate of 1,539.70 won on July 6. After reaching a peak of 1,561.50 won on June 5, the exchange rate has fallen to the mid-1430s earlier this month, following government measures to stabilize the foreign exchange market, demand for currency exchange related to SK Hynix's American Depositary Receipts (ADRs), and coordinated monetary policies between the U.S. and Japan.
As the upward trend in the exchange rate has subsided, industries that were struggling with high rates and declining performance are experiencing relief. A stronger won against the dollar means that companies in sectors such as aviation, batteries, steel, and petrochemicals, which pay for crude oil imports in dollars, will see a reduction in fixed costs and improved profitability. Airlines, which have faced significant losses due to rising foreign currency debt from costs like aircraft leasing, jet fuel, overseas maintenance, and parts purchased in dollars, are particularly hopeful. The travel and duty-free sectors are also anticipating a recovery in demand due to the stronger won.
Conversely, companies with a high export ratio are expected to see a decline in anticipated profits. Export sectors such as semiconductors, automobiles, shipbuilding, and defense receive payments in dollars, meaning that higher exchange rates lead to increased sales and operating profits. Analysts estimate that for every 10 won movement in the won-dollar exchange rate, Samsung Electronics and SK Hynix's annual operating profits fluctuate by approximately 300 billion won and 100 billion won, respectively. Hyundai Motor and Kia also project a decrease in operating profits by 200 billion to 300 billion won for every 10 won drop in the exchange rate.
Given the increased volatility in exchange rates, companies are preparing for long-term impacts. An industry insider stated, "The rapid fluctuations in exchange rates are becoming a burden on business operations. We are prioritizing the allocation of earned foreign currency to dollar-denominated expenses, aligning the scale of assets and liabilities by currency, and utilizing various derivatives to manage exchange rate risks effectively."
* This article has been translated by AI.
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