Dollar-carried Trade
It has been found that Korean exporters and importers are becoming increasingly dependent on the US dollar for trade settlement. Meanwhile, the amount of yen-based settlement is on the decline due to the weak yen trend. In particular, the ratio of dollar-based settlement has exceeded that of yen-based for the first time in the history of bilateral trade between Korea and Japan.
According to the Bank of Korea’s September 5 data on the ratio among settlement currencies for the first half of this year, dollar-based settlement accounted for 85.1% on the export side during the period, followed by the euro (5.7%), yen (3.4%), and won (2.2%). On the import side, dollar-based payment reached 84.7% and was followed by the yen (5.8%), euro (5.3%) and won (3.2%).
In short, the amount of dollar-based settlement showed a constant upward trend thanks to its aspect as a safe asset, whereas the euro and the yen were losing ground due to the former’s depreciation caused by the fiscal crisis and the weak yen trend preceded by the Abenomics policy. An increasing number of exporters and importers doing business with Japanese clients shunned the yen in particular for the same reason and opted for the US dollar instead.
This is the first time that the Japanese currency lost its number one spot as the settlement currency for bilateral trade since 1992, when the Bank of Korea began to compile related statistics. The central bank has reformed the statistical calculation method at this time to better monitor the foreign exchange market and the internationalization of the Korean won. The new data will be announced on a quarterly basis from this quarter on.