[Click eStock] Exchange Rate Surges Due to New Coronavirus... "Possibility of Surpassing 1200 Won"

[Asia Economy Reporter Oh Ju-yeon] Amid growing fears of the novel coronavirus infection (Wuhan pneumonia), the won-dollar exchange rate is also rising sharply. It is analyzed that the won may continue to weaken for the time being due to the novel coronavirus, and the possibility of breaking the 1,200 won support level should be considered.

On the 3rd, Hana Financial Investment revised upward its average forecast for the won-dollar exchange rate in the first quarter of this year to 1,185 won (previously 1,160 won).

Researchers Jeon Gyu-yeon and Na Jung-hyuk stated in a report, "The large-scale movement around the Lunar New Year and the recent rapid increase in confirmed and suspected cases remain risk factors," adding, "The turning point will ultimately be when the number of novel coronavirus infections peaks and begins to decline."

These researchers explained that during past outbreaks of Severe Acute Respiratory Syndrome (SARS) and Middle East Respiratory Syndrome (MERS), the domestic foreign exchange market was not significantly affected.

They said, "In 2003, the domestic economy was already sluggish due to internal demand contraction including the credit card crisis," and "The exchange rate in the first and second quarters of 2003 showed an upward trend with high volatility, but the background included concerns about the Iraq War, Moody's downgrade of Korea's credit rating outlook, and North Korea's nuclear issues." They also diagnosed that during the 2015 MERS outbreak, the exchange rate continued to rise, but the main factors were risk-averse sentiment due to expectations of interest rate hikes by the U.S. Federal Reserve (Fed), concerns about a Greek default, and financial instability in emerging countries such as China.

The reason why the won-dollar exchange rate reacts more strongly to the novel coronavirus compared to the past is analyzed to be because China's influence on the domestic economy has increased, and the domestic economic fundamentals are relatively weak.

They said, "During past infectious disease outbreaks, Korea's tourism income and the inflow of Chinese tourists decreased for several months and then rebounded," adding, "Of course, the damage will vary depending on the extent and duration of the novel coronavirus spread, but in the short term, damage to domestic service sectors including airlines, hotels, and tourism, which are heavily influenced by Chinese tourists, is inevitable."

They further analyzed, "The fact that the won is used as a proxy currency for the yuan is also a factor leading to the synchronization between the won and the yuan."

This content was produced with the assistance of AI translation services.