[Good Morning Stock Market] Won-Dollar Exchange Rate at 1000 Level... "Due to Expectations of Global Trade Normalization"

On the 3rd, employees are working at Hana Bank in Myeongdong, Seoul. On this day, the won-dollar exchange rate closed at 1,097 won, down 3.8 won from the previous day. (Photo by Yonhap News)

[Asia Economy Reporter Kum Boryeong] On the 3rd, the KRW-USD exchange rate closed at 1,097.0 won, entering the 1,000 won range. This is the lowest level in about 2 years and 6 months since June 2018. Analysts say that the dollar's weakness continues amid rising expectations for the normalization of global trade and U.S. fiscal stimulus measures.

◆ Gong Dong-rak, Researcher at Daishin Securities = The KRW-USD exchange rate broke below 1,110 won, entering the 1,000 won range. Under the global dollar weakness trend, risk appetite has expanded, leading to a stronger won by a larger margin. On the 3rd, in the Seoul foreign exchange market, the KRW-USD exchange rate closed at 1,097.0 won, down 3.8 won from the previous day. This is the lowest level in 2 years and 6 months since June 14, 2018 (1,083.1 won).

Recently, the won has continued to strengthen due to factors such as expectations for the normalization of the global economy following the development of the COVID-19 vaccine and a stock market rally. In particular, since September, under the ongoing global dollar weakness environment, the won has shown relatively larger strength by linking with the Chinese yuan.

The underlying reason for the won's much steeper appreciation compared to other currencies is the strong reflection of expectations that global trade, which was severely contracted due to COVID-19, will normalize. In fact, the won is often classified as a representative currency that is very sensitive to global trade trends, and as is well known, South Korea's exports turned positive in November.

The current won strength is expected to continue for a considerable period, with the first half of next year specifically suggested as a timeframe. This reflects the forecast that the global economy will continue in the early cycle phase, moving out of recession and into initial recovery, until that period. Additionally, the lower target for the KRW-USD exchange rate is also suggested at the previous low level of 1,050 won.

However, regarding short-term exchange rate volatility expansion, since verbal interventions and other government-level intervention signals have already been made several times, caution is advised about the possibility of intervention around the current exchange rate level below 1,100 won.

◆ Ahn Ye-ha, Researcher at Kiwoom Securities = The U.S. dollar continued its weakness as expectations for U.S. fiscal stimulus increased. Senate Majority Leader Mitch McConnell insists on a $500 billion stimulus package but has shown active engagement by exchanging opinions with House Speaker Nancy Pelosi, leading to continued additional dollar weakness. President Donald Trump also expressed his willingness to support the stimulus package.

Meanwhile, although expectations rose that the European Central Bank (ECB) would propose additional stimulus measures, the emphasis on the difficulty of interest rate cuts prevented the euro from turning weak and instead maintained a strong trend, which is also a factor in the dollar's weakness.