Gov't Asks Exporters to 'Release Dollars' as High Exchange Rate Persists

[Anchor]

I am joined by reporter Han Jiyeon for Friday's Friendly Economy. Reporter Han, the high exchange rate has been persisting for a very long time.

[Reporter]

As the exchange rate shows no signs of stabilizing, the government called in major exporting companies.

It requested them to release dollars into the market.

Six major exporting conglomerates, including Samsung Electronics and SK Hynix, attended the meeting yesterday (June 11).

What they have in common is that they are representative exporters that sell goods abroad and earn large amounts of dollars.

The government asked these companies to exchange their export earnings into won immediately upon receipt and to bring back funds accumulated overseas to South Korea.

This is because if companies release their dollar holdings into the market, it will increase the dollar supply and help ease upward pressure on the exchange rate.

A rising exchange rate is generally favorable for exporters.

Even if they earn the same $100 million, a higher exchange rate means they receive more money when converting it into Korean won.

However, if the exchange rate rises too high, the situation changes.

This is because the import prices of crude oil, natural gas, and grains rise, increasing the cost burden on companies and ultimately driving up inflation.

During the meeting, the government also expressed concern that a prolonged high exchange rate could increase the burden on businesses and households, weighing on the recovery of public livelihoods.

The participating companies also expressed their willingness to cooperate in stabilizing the foreign exchange market, noting that sharper fluctuations in exchange rates make currency risk management more difficult and increase business uncertainty.

[Anchor]

For now, there don't seem to be any particular factors that would bring it down.

[Reporter]

There are actually more factors pushing the exchange rate up.

Foreign capital outflows, the burden of high interest rates in the United States, and instability in the Middle East are currently supporting the high exchange rate.

Recently, foreign investors have been continuously selling domestic stocks.

Yesterday, they sold nearly 1.5 trillion won, marking the 24th consecutive trading day of net selling.

After selling stocks, they convert won into dollars to repatriate the funds, which increases the demand for dollars and exerts upward pressure on the exchange rate.

U.S. interest rates are another variable.

With the recent U.S. inflation rate rising to 4.2%, outlooks suggest that U.S. interest rates could remain high for the time being.

When interest rates are high, the appeal of dollar assets increases, and global capital tends to flock to the dollar.

Tensions in the Middle East also remain a source of instability.

If the conflict drags on, international oil prices could rise further, and investors seeking safe-haven assets like the dollar over risky assets could lead to a stronger dollar.

The market views recent exchange rate movements not as the result of new negative factors, but rather as existing negative factors continuing to pile up without being resolved.

Experts believe that exchange rate volatility is highly likely to continue for the time being, depending on U.S. interest rates and the international political situation.

[Anchor]

In the grand scheme of things, it's the same story, but dollar demand keeps growing, right?

[Reporter]

Indeed, the dollar deposit balance at the five major banks has surpassed 99 trillion won.

Interest is so high that the balance increased by about 2 trillion won in just one month.

Rather than simply buying dollars, investors now have a wider variety of products to choose from, depending on whether they prioritize safety or higher returns.

First, the most familiar way to invest in dollars is a dollar savings account.

This is the simplest way to hold dollars, by converting won into dollars and keeping them in an account.

Recently, interest in foreign currency RPs and dollar MMFs has also been growing.

A foreign currency RP, or repurchase agreement, is a product where investors invest in bonds held by securities firms and receive a promised return.

It can be used as a tool to manage dollars in the short term.

A dollar MMF, or money market fund, is a fund that invests in relatively safe financial instruments with short maturities, such as U.S. Treasury bills or commercial paper.

Investors can expect slightly higher returns than regular savings accounts.

In the case of short-term U.S. Treasury ETFs, which invest in bonds that lend money to the U.S. government for a short period and receive interest, investors can expect exchange gains if the dollar's value rises, along with bond interest income.

Demand for holding dollars for overseas stock investment or asset diversification remains steady.

Experts advise that it is important to choose products that match one's investment goals and time horizon.
※ Please note: This article was translated by AI and may contain errors.