Getting Rich Standing Still
The value of the Korean currency is on a rapid rise, as the Fed is not expected to raise interest rates within this year. As of Oct. 16, the won-dollar exchange rate closed at 1,129.1 won per U.S. dollar, down 57.6 won in comparison to that immediately before the FOMC meeting in mid-Sept.
The value of the Korean won compared to the U.S. dollar rose by 4.9 percent in a month. Among G20 member countries, only Russia, Indonesia, and Turkey recorded higher rates of appreciation during the period. Specifically, the Russian ruble gained 9.6 percent vis-à-vis the U.S. dollar, and it was followed by the Rupiah (6.2 percent) and the Lira (5.8 percent).
The won-dollar exchange rate rose to as high as 1,203.7 won per U.S. dollar early last month, when it was said that the Fed may raise interest rates this year. However, the strong won has continued since the benchmark interest rate freeze in the United States in Sept. “It seems that the value of the Korean won, which fell somewhat excessively in view of Korea’s robust economic fundamentals, is making a quick recovery, with an interest rate hike by the Fed not expected to occur before the end of this year,” an industry insider explained.
At present, the Fed is expected to adjust interest rates early next year and the won-dollar exchange rate is likely to go up again. “It is estimated that the rate would move between 1,170 won and 1,190 won per USD at this year’s end,” the Hyundai Research Institute remarked, adding, “There is a slim chance that it will exceed 1,200 won, though.”