Ants "Betting on Dollar Decline"... 100 Billion Won Net Purchase of Inverse ETFs

[Asia Economy Reporter Ji Yeon-jin] As the dollar continues its strong rally, the number of individual investors betting on a dollar decline is increasing.

According to the Korea Exchange on the 9th, individual investors net purchased 78.2 billion KRW worth of 'KODEX US Dollar Futures Inverse 2X' over the past month (August 8 to September 8). 'KODEX US Dollar Futures Inverse 2X' is an exchange-traded fund (ETF) that inversely tracks the dollar futures index return by 2 times, generating profits when the value of the dollar falls.

They also net purchased 'KOSEF US Dollar Futures Inverse 2X' (3.8 billion KRW) and 'TIGER US Dollar Futures Inverse 2X' (2.2 billion KRW), which track the dollar futures index return by -2 times, as well as 'KODEX US Dollar Futures Inverse' (12.6 billion KRW) and 'KOSEF US Dollar Futures Inverse' (0.6 billion KRW), which track it by -1 times. During this period, the total individual investor funds flowing into these five ETFs betting on a dollar decline reached 97.5 billion KRW.

More than half of the individual net purchases of these ETFs since the beginning of the year (156.4 billion KRW) were made in the past month. As the dollar's strength continues, the KRW/USD exchange rate surpassed 1,380 won for the first time in 13 years and 5 months on the 7th. The exchange rate set new highs for six consecutive trading days from August 31 to September 7. The dollar index, which shows the dollar's value against six major currencies, surged to 110.691 on the 7th, marking the highest level in over 20 years since June 18, 2002 (111.280).

However, the inverse ETFs betting on a dollar decline have yet to escape negative returns. In particular, ETFs that inversely track the dollar value by 2 times plunged by over 11% in the past month. Some experts caution that since the exchange rate may continue to rise for the time being, premature bets on a decline require careful consideration.

Seojeonghun, a researcher at Hana Bank, said, "If the decline in the US Consumer Price Index (CPI) inflation rate for August is more gradual than expected and the expected inflation does not significantly decrease, the possibility of the KRW/USD exchange rate reaching 1,450 won should also be considered."