[New York Diary] King Dollar: Their Currency, My Problem

The Strong Dollar Hurts Koreans in the U.S.
When "Your Problem" Becomes "My Problem"

[Image source=Reuters Yonhap News]

[Asia Economy New York=Special Correspondent Joselgina Cho] Recently, the number of Americans saying they plan to travel abroad has suddenly increased. It does not seem to be just so-called "revenge travel" suppressed by the pandemic. Those who say they plan to go to Europe, Japan, or India commonly express joy by saying, "The dollar is strong now, so we can travel cheaply."

My true feelings of envy are mainly twofold. I envy the travel itself, but I actually envy those who use the dollar, the global reserve currency, as their own currency even more. The dollar is their currency, but every time this happens, it becomes our, my problem.

In Manhattan, New York, notorious for high inflation, receiving a monthly salary in Korean won immediately connects the exchange rate to livelihood. At the beginning of the year, the won-dollar exchange rate hovered around 1,200 won, but it surpassed 1,300 won in June and rose to the 1,400 won range in September. Even talk of breaking through 1,500 won, which seemed unlikely, has begun. Expatriates working locally sigh that their annual salary is effectively cut. International students confessed, "I feel sorry for my parents."

Among Koreans living locally, mentions of the past foreign exchange crisis have also increased significantly. Stories include being shocked when the same amount sent in won was halved or ultimately having to give up studying abroad and return home. A graduate student attending Columbia University said, "It’s not much different even now," and shared the atmosphere, saying, "With inflation and high exchange rates combined, some friends have chosen to take a leave of absence and return to Korea this year."

In the market, there is a flood of fear that a foreign exchange crisis might be repeated. While the U.S. Federal Reserve (Fed) reaffirmed its high-intensity tightening stance, Korea recorded a trade deficit for five consecutive months for the first time since 2007.

In fact, the strong dollar was a predicted step. Prices and interest rates are tightening the breath of economic agents, but the economy has always followed a cycle of bubbles and collapses amid tightening and easing, and this is likely part of that process. However, knowing this, the helplessness felt when the "king dollar" pressures the global economy, the Korean economy, and my wallet is even greater. The reason why the remark by John Connally, then U.S. Treasury Secretary attending the 1970s Group of Ten (G10) meeting, "The dollar is our currency, but it’s your problem," has been mentioned more frequently recently is probably for the same reason.

High inflation and high exchange rates are said to be within the scope of policy response. But it seems there is no particular solution. It is certain that U.S. interest rates will remain higher than Korean rates, and considering the massive household debt, it is difficult for the Bank of Korea to raise rates as much as the U.S.

The whole world is just quietly watching the U.S. Their dollar has become our problem, but they will not consider our economic situation either. In the end, everyone must fend for themselves.