[Won-Dollar] Brief Rise... Trendual Decline Likely Hard to Break

Hi2證 Won-Dollar, Entering a Trend Upward Phase?
Brief Rise After Two and a Half Months, but Trend Downward Likely to Continue

[Asia Economy Reporter Hwang Junho] On the 28th, the won-dollar exchange rate hit its highest level in two and a half months, but analysis suggests that the additional downward trend has not stopped.

Hi Investment & Securities analyzed the won-dollar market situation from the previous day through today's chart on the 29th. The won-dollar exchange rate closed at 1119.6 won, up 15.2 won from the previous day. This is the highest level in two and a half months since it closed at 1115.6 won on November 13.

The scene of Hana Bank dealing room on the 9th / Photo by Hyunmin Kim kimhyun81@ (unrelated to the article)

Hi Investment & Securities analyzed that this rise is a temporary phenomenon and it is difficult to see it as a trend reversal. They also forecast that the won-dollar exchange rate will fluctuate above 1100 won for the time being while continuing the downward trend.

First, the sharp rise in the won-dollar exchange rate the previous day was analyzed to be due to a combination of factors including uncertainty risk regarding the U.S. economy, weakening risk asset preference due to adjustments in global stock markets including U.S. stocks, liquidity absorption in China, expanded net foreign stock selling domestically, concerns over domestic fiscal burden due to the COVID-19 compensation system, and increased dollar demand sentiment due to Samsung Electronics' dividend expansion.

However, it was expected that if the COVID-19 vaccination speed accelerates, the uncertainty risk regarding the economy is likely to ease. This would strengthen risk asset preference among investors in the U.S., Europe, and other regions, exerting downward pressure on the dollar. The global stock market adjustment is also expected to be a short-term correction, and if vaccine distribution expands and additional U.S. fiscal stimulus is strengthened in the future, stock growth momentum could rather be reinforced.

The domestic economy’s fundamentals could improve through export recovery followed by manufacturing sector recovery, and a stronger-than-expected semiconductor business cycle is expected to contribute not only to the manufacturing sector but also to an expansion of the domestic trade surplus, thereby exerting upward pressure on the won. The January Business Survey Index (BSI) for business conditions rose 3 points from the previous month to 85, and the BSI for business outlook next month also rose 4 points from the previous month to 81, indicating that despite the resurgence of COVID-19, the manufacturing business conditions continue to improve.