The won-dollar exchange rate has fallen to its lowest level in over a year, drawing attention to future currency trends. Increased dollar sales by companies due to strong exports, combined with a strengthening yen, are putting upward pressure on the won. Market analysts predict that the exchange rate could drop further into the low 1300s in the short term.
According to the Seoul foreign exchange market on September 6, the won reached the 1340s against the U.S. dollar during trading on September 4. As of 3:30 PM on that day, the exchange rate was 1350.4 won, marking the lowest level since June 30 of last year, when it was 1350.0 won.
The exchange rate has shown a sharp decline recently, dropping nearly 20 won over four days from September 1 to 4. The steady supply of dollars from exporting companies, along with the yen's strength, has supported the won's appreciation.
In particular, the supply of dollars from exporting companies is a key factor in the exchange rate's decline. Unlike in the past, when exporters typically sold dollars at the end of the month, they are now consistently releasing their dollar holdings into the market.
From January to July this year, South Korea's current account surplus reached $223.1 billion, ranking second globally for the first half of the year. Analysts suggest that the ongoing record-high current account surplus, coupled with strong exports, is contributing to the steady influx of dollar sales from companies.
The recent rise in the value of the Japanese yen is also seen as a factor supporting the won's strength. The Bank of Japan's (BOJ) potential for further interest rate hikes has led to a stronger yen. Given the correlation between the won and yen, the yen's strength may reduce upward pressure on the won-dollar exchange rate. Market observers are closely watching for the possibility of an additional rate hike by the BOJ this month.
Until the first half of this year, the exchange rate had risen to the high 1500s due to strong demand for dollars. This was driven by domestic investors' increased foreign stock investments and foreign investors' profit-taking and portfolio rebalancing in the domestic stock market, which weakened dollar supply. However, the situation has changed recently. While strong exports have increased dollar supply from companies, dollar demand has weakened, leading to greater downward pressure on the exchange rate.
Kwon Ah-min, a researcher at NH Investment & Securities, stated, "The recent surge in dollar supply from companies due to strong exports has led to a sharp decline in the exchange rate. We believe the short-term supply-demand balance has shifted in favor of supply."
There are also forecasts that the exchange rate could drop further into the low 1300s. The continued strength of exports and South Korea entering a rate hike cycle are seen as supporting factors for the won's appreciation. However, given the recent rapid decline in the exchange rate, there may be a need for a slowdown in the pace of further decreases.
Moon Da-woon, a researcher at Korea Investment & Securities, commented, "Considering the current macroeconomic situation in Korea, the low 1300s seems appropriate. Given domestic and external conditions, we expect the exchange rate to drop further to at least the low 1300s by the end of the year, but the pace will likely moderate. For now, we see a high likelihood that the exchange rate will stabilize in the mid to high 1300s after a slight further decline."
* This article has been translated by AI.
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