Retail Investors Betting on Currency Decline Cheer Double-Digit Gains in ETFs

Individual Investors Focus on Trading KODEX Miguk Dallaro Seonmul Inbeoseu 2X and Others
Further Dollar Weakness Expected ... Potential for Higher Returns

[Asia Economy Reporter Kwon Jae-hee] As the won-dollar exchange rate dropped to the 1,280 won level after peaking last October, individual investors betting on the dollar's decline are cheering louder. With the judgment that the exchange rate has reached its peak, individual investors have been betting on the won-dollar exchange rate decline, leading to double-digit growth rates in exchange-traded funds (ETFs) that follow the dollar's weakness. As the possibility of a further decline in the won-dollar exchange rate is raised, the rise in ETFs tracking the dollar's weakness is expected to increase even more.

According to the Korea Exchange on the 23rd, since the won-dollar exchange rate hit its highest point of 1,442.50 won on October 14, until December 22, individual investors traded 507.6 billion won worth of 'KODEX US Dollar Futures Inverse 2X.' This ETF product inversely tracks the US dollar futures index by 2 times, meaning it profits when the dollar weakens. Conversely, the product with the opposite characteristic, 'KODEX US Dollar Futures Leverage,' which profits when the won-dollar exchange rate rises, recorded 193 billion won in trading volume during the same period. Additionally, other inverse-type products such as 'TIGER US Dollar Futures Inverse 2X' traded 19.5 billion won, and 'KOSEF US Dollar Futures Inverse 2X' traded 25.5 billion won.

During this period, the dollar futures inverse ETF products also recorded double-digit growth rates. 'KODEX US Dollar Futures Inverse 2X' rose by 24.24%, 'TIGER US Dollar Futures Inverse 2X' by 24.22%. 'KOSEF US Dollar Futures Inverse 2X' also recorded a 24.16% increase. In addition, 'KOSEF US Dollar Futures Inverse' rose by 11.96%, and 'KODEX US Dollar Futures Inverse' by 11.90%.

Due to the continued dollar strength, the won-dollar exchange rate reached a record high of 1,442.50 won on October 14. The won-dollar exchange rate soaring to the 1,400 won level was the first time in 13 years and 7 months since March 2009 during the global financial crisis. Since then, the exchange rate has steadily declined and is currently trading at 1,283.50 won as of the 23rd.

With securities firms forecasting that the dollar's weakness will continue for the time being, the amount of funds flowing into dollar futures inverse ETF products is expected to grow further. Park Sang-hyun, a researcher at Hi Investment & Securities, analyzed, "So far, rapid dollar weakness has continued due to expectations of the end of the US Federal Reserve's (Fed) rate hike cycle and the resulting emphasis on the dollar peak theory. The resolution of the monetary policy differentiation between the US and major countries will act as additional downward pressure on the dollar."

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