ⓒ JoongAng Ilbo / JoongAng Ilbo Japanese version2022.09.18 10:33
In the “Kingdol” era, the expression “strong dollar” has changed to “Kingdol” one or two times. Given the recent strength of the dollar, it should be. Currencies of major countries are depreciating once morest the dollar every day. The won value is the same. The won exchange rate dropped to 1,393.70 won to the dollar on the 15th. It surpassed the 1,390 won level for the first time in 13 years and five months.
The history of the Kingdle era left a brutal lesson. The strong dollar pushed South Korea and other Asian countries into a currency crisis in 1997, and caused a financial crisis in Russia the following year. It’s still the same. Sri Lanka has declared default and is in talks with the International Monetary Fund (IMF) for a $3 billion bailout. Pakistan and Bangladesh have also requested relief funds from the IMF. If the strong dollar combined with the default domino effect of emerging countries, the Korean financial market would not feel secure.
However, the position of the South Korean government and the Bank of Korea remains at the level of “monitoring with vigilance,” according to Choo Kyung-ho, Deputy Prime Minister and Minister of Strategy and Finance. Considering that the government has reacted nimbly to the exchange rate in the past, it is virtually non-existent. This is because the foreign exchange reserves reached 436.43 billion dollars as of the 5th, and the external soundness indicator is stable. In terms of foreign exchange reserves alone, China ranks ninth in the world, more than 20 times the amount of $20.4 billion at the time of the 1997 currency crisis. It is more than twice as high as the 2008 financial crisis. At any time, it decides that it is not enough to unwind the dollar and take measures to stabilize the market.
It is true that the basic physical strength of the Korean economy is different from that of past crises. Although the value of the won fell sharply, the credit default swap (CDS) premium, which is a national credit risk indicator, has been on a downward trend since July. The current account balance is still at a good level, recording a surplus of 24.8 billion dollars in the first half of the year. Therefore, the government warns that if it overreacts and increases foreign exchange reserves more than necessary, the opportunity cost will increase and side effects may occur. The Bank of Korea recently explained that the appropriate size of foreign exchange reserves should be evaluated from a long-term and dynamic perspective.
