[King Dollar's Bombardment] Strong Dollar Slows US Direct Purchases... Japanese Direct Purchases Surge

One-Dollar Exchange Rate Expected to Stay in the 1400 Won Range "For the Time Being"

On the 4th, overseas direct purchase items bought by domestic consumers during the Black Friday period are piled up at the Incheon Customs Express Logistics Center in Jung-gu, Incheon. / Yeongjongdo - Photo by Kang Jin-hyung aymsdream@

[Asia Economy Reporter Yu Je-hoon] University student Myungseop Lee (26) recently changed his mind about purchasing a tablet PC for video viewing through AliExpress and decided to find a used product in the domestic market instead. Although the price of cost-effective tablet PCs dropped to around $180 in special deals, the sharp rise in the exchange rate pushed the converted price in Korean won above 250,000 won, making it difficult to feel the benefit of the discount.

As the "strong dollar" phenomenon continues, patterns of overseas direct purchases (direct import) are changing. While the number and amount of direct purchases through the United States are both declining, direct purchases through Japan and China, which continue quantitative easing, are showing significant growth.

According to the financial sector on the 7th, Shinhan Card reported that the number and amount of overseas direct purchases from the U.S. from January to July decreased by 16% and 8%, respectively, compared to the previous year. This sharply contrasts with the overall overseas direct purchase number and amount, which increased by 12% and 25%, respectively.

The cause of the decline in U.S. overseas direct purchases is attributed to the soaring exchange rate. As of the previous day, the won-dollar exchange rate in the Seoul foreign exchange market rose by 0.3 won to 1,371.7 won. This represents about a 16% increase compared to the beginning of the year. Assuming a direct purchase of daily necessities worth $100, this means an increase of about 18,000 won compared to the start of the year.

On the other hand, overseas direct purchases from Japan and China are increasing significantly. During the same period, the number and amount of direct purchases from Japan increased by 21% and 8%, respectively, while those from China expanded by 5% and 22%, respectively. This is the exact opposite trend of the decline in U.S. overseas direct purchases.

The industry views the reason for the increase in direct purchases from Japan and China as also related to exchange rates. Despite the global trend of rising interest rates due to inflation, Japan and China continue to maintain opposite interest rate policies. The Bank of Japan (BOJ) has kept its benchmark interest rate unchanged and continues its accommodative monetary policy, while China has lowered policy rates to stimulate the economy.

Accordingly, unlike the dollar exchange rate, the yen and yuan exchange rates show weakness or stability. In fact, the won-yen exchange rate fell by 18.93 won to 956.05 won per 100 yen as of the previous day, down 7.14% (73.52 won) compared to the beginning of the year (1,029.57 won). The won-yuan exchange rate was 197.52 won per 1 yuan, up 6.05% (11.26 won) compared to the beginning of the year (186.26 won), showing a relatively smaller increase.

This trend is likely to continue for the time being. The U.S. Federal Reserve (Fed) is considering raising the benchmark interest rate until the first half of next year, and the sluggish economies of various countries are driving up the value of the dollar. Senior researcher Jeon Gyu-yeon of Hana Securities said, "The weak European economy is expected to induce dollar strength, and the widening trade deficit in Korea in August also supports won weakness," adding, "There is no proper resistance level at the current exchange rate, and it is necessary to keep the upper limit of the won-dollar exchange rate open up to 1,400 won."