(Seoul = Yonhap Infomax) Reporter Kyung-rim Kim = The Korean Chamber of Commerce and Industry predicted that the dollar-won exchange rate will continue to rise until the first half of next year.
The Sustainable Growth Initiative (SGI) under the Korea Chamber of Commerce and Industry (KCCI) reported on the 4th that it would be difficult to resolve the strength of the dollar in a short period of time due to concerns regarding a global economic recession and normalization of US monetary policy.
The dollar-won exchange rate has continued to rise following entering the 1,200-won range in February, reaching the mid-1,300 range.
The report pointed to the normalization of monetary policies in each country, the Russia-Ukraine crisis, deterioration of the balance of payments, and concerns over a global economic recession as the background of the exchange rate rise.
In the process of normalizing the accommodative monetary policies implemented in each country due to the novel coronavirus infection (COVID-19), the US Federal Reserve (Fed) raised the key interest rate four times this year alone, and the dollar-won rose sharply.
In the future, the US monetary policy stance is also expected to focus on price stability and maintain austerity until the end of next year.
In the dot chart released on the 6th, the median interest rate at the end of this year was 3.4% and at the end of next year was 3.75%.
The report predicts that the upward trend in the USD-KRW exchange rate is highly likely to be maintained until the first half of next year along with the US monetary policy stance.
The report cited a decrease in savings and an increase in income and expansion of overseas investment due to the rapid aging of the population as the long-term causes of the exchange rate rise.
He also pointed out that while the Korean economy has grown on the basis of a surplus in the goods and trade balances through exports, the recent strengthening of the dollar is unlikely to lead to an increase in corporate profits.
In addition, the increased interest burden on foreign currency debt may cause investment to contract, and there are concerns that domestic prices may rise due to the burden of tariffs on imported crude oil, the report said.
In response to such concerns, the report pointed out that countermeasures such as lowering crude oil tariffs, signing currency swaps, and expanding the limit of exchange rate fluctuation insurance are necessary.
Min Kyung-hee, a research fellow at SGI at the Korea Chamber of Commerce and Industry, said, “In a situation where the possibility of a global economic downturn is increasing, policy measures for market stabilization should be actively implemented so that risk factors do not spread into financial and real economy crises.” Efforts should be made to alleviate sensitivity to exchange rates, such as diversifying payment currencies,” he advised.
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