Foreign exchange authorities have less room for active intervention
It is difficult to violate the strong won
[이미지출처=연합뉴스]
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[아시아경제 김은별 기자] Korea has not escaped from the US’exchange rate observation country’. With the recent plunge in the won-dollar exchange rate, there is little room for active intervention, which is deepening the concerns of the foreign exchange authorities. This is because if the foreign exchange authorities step forward to prevent the exchange rate from falling, it could go to the worst situation, designated as a currency manipulator in the future.
On the 16th (local time), the US Treasury Department published an exchange rate report and maintained Korea, China, Japan, Germany, Italy, Singapore and Malaysia as target countries. India, Taiwan, and Thailand have been added to the new countries to be observed. Observed countries are constantly monitored by the United States for currency manipulation. Switzerland and Vietnam have been designated as currency manipulators.
As of the past one year, the requirements for designating a currency manipulator in the U.S. ▲ exceeded US$20 billion in trade surplus ▲current account surplus exceeded 2% of gross domestic product (GDP) ▲Over 2% of GDP Etc. Observed countries are subject to ongoing surveillance by the US Treasury Department. According to the US Treasury Department, the trade surplus with the US was 20 billion dollars, and the ratio of the current account surplus to GDP was 3.5%. This is the figure analyzed by the US Treasury Department over the past year as of June this year. Korea remained subject to observation due to the two preceding requirements.
It wasn’t designated as a currency manipulator, but it’s not good news that it has remained as an observer. With the recent weakening of the dollar, the won is showing a relatively strong trend because there is less room for the foreign exchange authorities to respond.
When foreign exchange authorities buy dollars to depreciate the won, the US Treasury Department has no choice but to look. Smoothing operations or oral interventions that are adjusted at an appropriate level are possible, but these measures are insufficient to prevent the won appreciation. However, it is impossible for the foreign exchange authorities to let go of their hands. This is because the strong won is unfavorable to exporting companies due to the economic structure of Korea, which has a high proportion of exports. In particular, small and medium-sized export companies that cannot produce through currency hedging or overseas subsidiaries are inevitably affected.
Experts believe that the won’s strong trend will continue as the recent weakening of the dollar continues. The dollar index, which represents the value of the dollar against the currencies of six major countries, fell to the 90.15 level during the day. The dollar index exceeded 102.8 when the dollar shortage occurred at the end of March, which was the beginning of the spread of Corona 19, but the dollar’s value declined due to the continued money release of the US Federal Reserve System (Fed). As the easing monetary policy continues due to the re-proliferation of Corona 19 The dollar value is likely to decline further. Experts believe that the won-dollar exchange rate in the first half of next year could fall to the 1040 won level. As of 10:46 am on the day, the exchange rate between the won and the dollar in the Seoul foreign exchange market is 1093.25 won and is below 1100 won.
It is said that it is a difficult trend for the foreign exchange authorities to respond to as the won-dollar exchange rate declines according to the global stance. A market official pointed out that “the recent strong won is an unavoidable result of Korea’s relatively high economic growth rate and strong current account,” he said. “It is a natural situation to bear the weight of the crown.”
Reporter Eun-Byeol Kim [email protected]
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