[PB Notebook] Wise Dollar Asset Investment Strategies in the High Exchange Rate Era

▲Nam Taegyo Hana Bank Lotte World Tower Gold Club Gold PB Manager

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The new year of Eulsa has dawned, but volatility in domestic and international financial markets continues. The still robust U.S. economic indicators have raised concerns that the rationale for aggressive interest rate cuts may weaken, leading to a surge in U.S. Treasury yields and the dollar index. Coupled with domestic and international uncertainties, the won-dollar exchange rate once approached 1,500 won. The exchange rate, a barometer of the national economy's strength, is determined by such complex factors. Considering the current domestic and international economic situation, the prevailing view is that while the dollar's strength will experience some fluctuations, it is likely to persist going forward.

Among customers who have long diversified their currency investments with dollars, some are seeking foreign exchange gains by taking advantage of the current high exchange rate. In such cases, these gains are excluded from taxation and therefore are not included in comprehensive income. Meanwhile, inquiries from those wishing to maintain their current dollar asset positions and continue investing are also increasing. Accordingly, we would like to introduce several products among various dollar investment methods.

A representative dollar investment method is foreign currency deposits. Like the Korean won, dollar time deposits are available. The subscription period ranges from 1 day to 24 months, offering fixed interest rates depending on the deposit period, with no limit on the subscription amount. If you have a balance in a foreign currency demand deposit account, which typically yields little interest, and have no immediate plans to use the funds, we recommend converting it to a time deposit.

Dollar short-term bond funds are also worth considering. The biggest advantage of dollar short-term bond funds is that there are no redemption fees, allowing for frequent deposits and withdrawals, making them suitable for short-term fund management. These funds invest in high-credit-quality assets such as U.S. Treasuries and high-grade won-denominated bonds to pursue stable management. However, unlike foreign currency deposits, they are not principal-guaranteed products, and returns depend on bond management results.

You can also subscribe to insurance products denominated in dollars. Although it varies by product, the subscription age ranges from 0 to 85 years old, with a minimum subscription amount starting at $15,000. After a certain period, you can choose to receive annuity payments. Some products have declared interest rates that fluctuate monthly or quarterly, while others have declared interest rates fixed for 10 years from the subscription date. Currently, since future interest rates are expected to trend downward, fixed-rate products are more advantageous than variable-rate ones. When bond yields rise, returns fall, and conversely, when yields fall, bond returns increase. Therefore, if you surrender or withdraw early at a time when market interest rates have fallen compared to the subscription time, the refund rate increases. Additionally, if insurance is maintained for more than 10 years, you can utilize a tax-exempt limit of 100 million won per person, so we recommend carefully checking whether you still have any tax-exempt limits available.

Besides the products introduced above, there are more dollar-based products than you might expect, such as dollar ELS, dollar government bonds, and dollar ETFs. Since the underlying assets, product structures, and included securities differ for each product, it is essential to have accurate knowledge of the products not only through consultation with financial institution sales staff but also by reviewing product prospectuses.

Above all, it is crucial to first consider your investment preferences and liquidity issues. It goes without saying that accurately understanding the risks associated with the product you wish to subscribe to is extremely important.

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