Two Out of Three Daegu Companies See Operating Profits Fall Due to Soaring Exchange Rate: "Request Support for FX Risk Management"

Daegu Chamber of Commerce Surveys 443 Member Companies
Most Prefer Exchange Rate Between 1,250 and 1,300 Won

The won-dollar exchange rate, which threatened to surpass 1,500 won last month, has fallen to the 1,450-won range thanks to stabilization efforts by the foreign exchange authorities. However, local companies are still experiencing significant management burdens due to the sharp rise in the exchange rate.

The Daegu Chamber of Commerce and Industry (Chairperson Park Yoonkyung) announced on January 12 that it conducted a survey on the impact of the surging won-dollar exchange rate, targeting 443 companies in Daegu (with responses from 258 companies).

Daegu Chamber of Commerce and Industry

According to the survey, two out of three responding companies perceive the current situation as "serious" (very serious + somewhat serious) due to the sharp rise in the won-dollar exchange rate.

Regarding the overall impact on management, four out of five companies responded that they are experiencing "negative effects" (very negative + somewhat negative), while only 12.0% said they are experiencing "positive effects" (very positive + somewhat positive).

Among the companies that reported "negative effects," the most frequently cited reason (multiple responses, up to three) was "increased prices of imported raw materials and energy" (85.4%). This was followed by "rising logistics costs" (60.2%), "foreign exchange losses on foreign currency settlement payments" (19.9%), "pressure to lower supply prices from prime contractors or overseas trading partners" (15.5%), and "foreign exchange losses from the valuation of foreign currency assets and liabilities" (9.7%).

On the other hand, among the companies that reported "positive effects," the most common reason was "foreign exchange gains on export performance" (87.1%).

As for the foreign currencies used for receiving (settling) export and import payments (multiple responses), the US dollar was the most common at 90.6% and 77.9%, respectively, followed by the Japanese yen (11.5% and 20.6%), the euro (13.5% and 4.4%), and the Chinese yuan (4.2% and 11.8%).

Regarding changes in operating profit after the sharp rise in the exchange rate, two out of three companies said their profits "decreased," with "a decrease of less than 1-9%" being the most common at 35.6%. The proportion of companies reporting a "decrease of 10-20%" and "a decrease of more than 20%" was 21.3% and 10.5%, respectively.

In terms of responses to exchange rate fluctuations (multiple responses, up to two), "cost reduction efforts" was the most common at 62.4%. Additionally, 31.8% responded that they "have not taken any particular measures," indicating that a significant number of companies are struggling with foreign exchange risk management. Other responses included "adjusting export/import prices (or quantities)" (26.4%), "reflecting changes in product prices" (23.3%), "diversifying import sources" (9.7%), "purchasing financial products such as FX hedging or exchange rate fluctuation insurance" (4.3%), and "diversifying settlement currencies" (4.3%).

The most common response regarding the appropriate won-dollar exchange rate level perceived by companies was "1,250 to less than 1,300 won" at 31.0%. This is about 150 to 200 won lower than the recent exchange rate, indicating that companies are feeling a significant burden from the current rate.

Regarding the impact of exchange rate uncertainty on this year's (2026) business planning (multiple responses, up to two), "conservative budgeting focused on cost reduction and business restructuring" accounted for the highest proportion at 65.5%. This was followed by "reducing investment scale and postponing new investments" (25.6%), "modifying business strategies" (25.2%), and "uncertainty in setting business indicators" (21.3%).

Meanwhile, regarding the government support policies desired in relation to foreign exchange risk (multiple responses, up to two), "active intervention in the foreign exchange market" was the highest at 56.6%, followed by "expanding support for trade finance and policy funds" at 55.0%. Other responses included "revitalizing the supply price linkage system" (24.4%), "support for foreign exchange risk management consulting" (14.0%), and "support for exchange rate insurance premium costs" (11.6%).

Lee Sanggil, Executive Vice President of the Daegu Chamber of Commerce and Industry, stated, "Despite the foreign exchange authorities' stabilization measures, the exchange rate level felt by local companies remains very high. Since the Daegu region has an industrial structure with an overwhelmingly high proportion of small and medium-sized enterprises, which are more vulnerable to foreign exchange risk than large corporations, the government needs to provide a wide range of support measures for foreign exchange risk management, such as expanding exchange rate fluctuation insurance and policy finance support, to ensure the management stability of SMEs."