© Reuters. Pension fund exchange cover 40 billion won released … The exchange rate is likely to fall further
This month, the value of the won rose 8.0% against the US dollar, the highest among 31 major currencies. Since the government announced on the 11th that the government will release about $40 billion into the foreign exchange market according to the plan to adjust the foreign exchange hedging ratio, there is a possibility that the exchange rate will fall further (the value of the won will rise ).
According to Bloomberg News on the 13th, the value of the won increased by 8.0% against the dollar between the 1st and 11th. It is the highest gainer among 31 major currencies as compiled by Bloomberg. In second place was the Japanese yen, up 7.1%.
Up until last month, the market was expecting the won-dollar exchange rate to rise to 1,500 won, but the mood has changed in just one month. The increase in the consumer price index (CPI) in the United States last month was 7.7%, which is lower than the market estimate (7.9%) and the previous month (8.2 %). As a result, the prospect of the US central bank (Fed) starting to adjust the pace of rate hikes is gaining momentum.
China’s decision to ease restrictions on COVID-19 prevention and control is also a factor that may support the exchange rate decline going forward. Chinese authorities have confirmed a number of mitigating measures, such as shortening quarantine regulations for foreign arrivals from 7 days (3 separate days of self-isolation) to 5 days.
The Korean government is also venting a policy to stabilize the exchange rate. Following the promotion of foreign exchange exchanges between the Bank of Korea and the National Pension Service and the support of forward sales by shipbuilders, the government has decided to request the National Pension Service and 12 other public investors to adjust their exchange rate hedging ratios. The size of the foreign assets held by the 12 public investors is estimated to be around $400 billion, and the government has been known to ask each investor to increase the foreign exchange hedge ratio by around 10 percentage points. This will release $40 billion into the market. Considering that the daily trading volume of the domestic foreign exchange market is about $7 billion, experts predict that it will have a big impact.
On the other hand, there are views that it is difficult to guarantee that the depreciation of the exchange rate will continue. It is unclear how far the Fed will raise its key interest rate and Korea’s trade balance continues to run a deficit. It ran a trade deficit for seven straight months to last month, and the deficit is very likely to continue this month as well. There are also forecasts that the global economy will seriously slow down next year, leading to sluggish exports to Korea.
Reporters Do Byung-wook and Heo Se-min [email protected]
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