[Click eStock] "Short-term Exchange Rate Volatility Inevitable... Possibility of 1500 Won Realization"

NH Investment & Securities forecasted on the 30th that short-term volatility in the exchange rate is inevitable, and if domestic political instability deepens, the won-dollar exchange rate could realistically reach 1500 won.

Since the passage of the impeachment motion against the acting president on the 27th, political instability has intensified, causing the exchange rate to surge. The won-dollar exchange rate surpassed 1486 won intraday on the 27th, marking the highest level in 15 years and 9 months. The exchange rate level around 1480 won is deteriorating domestic fundamentals amid a strong dollar bet. It was judged that this level fully reflects political uncertainty and that the depreciation against major currencies is excessive.

NH Investment & Securities maintains its outlook on external factors but notes that domestic political uncertainty is currently increasing short-term volatility in the exchange rate. They foresee that if additional impeachment becomes a reality and foreign capital outflows occur, the exchange rate could surpass 1500 won.

Following the presidential election, uncertainties over Trump’s policies and expectations of Federal Reserve (Fed) rate cuts after the Federal Open Market Committee (FOMC) meeting have already been somewhat priced into global dollar long bets (speculative net purchases). They believe that chasing dollar purchases at the current level offers limited benefits.

The authorities have expanded and extended the scale of foreign exchange swaps with the National Pension Service. They also announced several measures, including easing regulations on banks’ forward foreign exchange positions. Rather than viewing these measures as ineffective, it was judged that the policy effects were not visible due to a significant decline in trading volume toward the year-end. The increase in banks’ forward foreign exchange position limits linked to export companies’ hedging demand is the first regulatory easing since COVID-19. This is expected to have a future dollar supply effect.

With trading volume recovering to normal levels in the new year and an increase in short-term borrowing by banks due to export companies’ volume emergence, the exchange rate level is expected to stabilize. The average exchange rate for the first half of the year is forecasted to be in the low 1400 won range, and it is expected to maintain a high-start, low-finish trajectory for the year 2025 from the already elevated current level.

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