Interest rates and exchange rates seem to be very

Interest rates and exchange rates seem to be very high. When I talk to many people, I have a lot of opinions that the exchange rate will rise. Three years ago when the Legoland crisis occurred… When the exchange rate was around 1450 won, is there a high possibility of 1,600 won in the next few years? Is there a high possibility of 1,300 won… That’s what I’m saying… I gave you 150 won plus minus and asked you questions.

Most of you said it would go back to 1300. Yes, the exchange rate of 1450 won is crazy… The exchange rate has no choice but to return to normal in the end… It was a time when I thought that 1300 won was also high. The exchange rate now exceeds 1460 won… Will the exchange rate be at KRW 1300 in the next 5 years? Or KRW 1600. Of course, the answer will vary from person to person… I think the exchange rate is higher than in 2022… In other words, the number of people who keep 1600 won open has increased a lot. Yes… The perception that the exchange rate and interest rate are Higher for Longer… There is a strong opinion that the exchange rate in the 1,400 won range will become the new normal. That’s how much the market is getting used to the exchange rate.

I also.. I don’t have much doubt about that direction. There are a lot of factors that cause the exchange rate to go up. There are structural and temporary, or cyclical, among the structural factors, the increase in foreign investment… And shrinking trade surplus from mid- to long-term perspective due to slowing manufacturing productivity… When these two things overlap, the dollar coming in is going to decrease, the dollar going out is going to go up, the exchange rate is going to go up structurally, but… As I said last time, foreign investment and capital outflow are completely different. When a foreigner runs away and the exchange rate jumps, it not only bounces quickly, but also… It’s going to have a huge impact on the entire capital market, and the CDS premium is going to be one of the most representative aspects.

On the other hand, overseas investment is either buying stocks or bonds abroad, or setting up factories or offices overseas… You get foreign real estate assets and overseas goodwill, and yes, foreign assets are increasing, as stocks, bonds, real estate, or businesses generate a variety of income… Dividends, interest, etc. will flow into the country. Recently, in Korea’s current account, dollars earned from dividends and interest from overseas… In other words, the income balance is increasing significantly… And I think we need to pay attention to this, as this gets bigger, even if the trade of goods, the dollar that comes in through the trade of goods, is reduced in the future… The dollar from foreign investment income can increase significantly. It can be a major variable that can put an intermediate tackle on the rise of the structural exchange rate.

Yes, from a long-term perspective, a trend increase in foreign investment can lead to structural changes in exchange rates. I’ve said that I agree with you on the point that, in the short term, things can be a little different. When you see a surge in the exchange rate in the last year… Bank of Korea Governor Lee Chang-yong and others… Foreign exchange authorities used to pay attention to volatility rather than to the level of the exchange rate. The exchange rate is going up little by little… not like it’s getting wet in the drizzle… If you start splashing hard in the short term…. First of all, it could lead to fears that there might be a national risk… On the other hand, the idea that the dollar is getting stronger at a faster rate could lead to a move to buy more dollars, which would lead to a surge in demand for dollars…(The higher the dollar rises, the faster the demand grows. If the stock goes up, it’s like buying more stock.) The problem is, in this case, the players holding the dollar won’t sell the dollar, or they won’t hedge. They made a lot of dollars through exports, but they’re expecting the dollar to go higher… Wouldn’t there be no reason to sell the dollar now? This could lead to a twist in the supply and demand of the dollar and further strengthen the dollar’s strength.

In the short term, supply and demand can have an impact. But, what if the short-term surge in the dollar right now was a bit excessive? What if that perception is in the market? Yes, in this case, there could be a lot of dollar sales that have been going on without selling. The expectation that the dollar has gone up too much… It could stimulate hidden supply, which in the short term could significantly push down the dollar exchange rate. For example, I thought it would be difficult to cut interest rates in the United States, but all of a sudden, it’s very fast, it’s expected to lower interest rates more than market expectations… Easing U.S. banks’ financial regulations will lead to an expansion of bank liquidity supply… U.S. interest rates are coming down at a fast pace, pushing down the value of the global dollar, not a little bit.. When external factors are very strong… You can sell your dollar or you can go on some currency hedging and the exchange rate can be very volatile, yes, in the long run, even if the upward picture is right, you have to keep in mind that in the short run, it can be very volatile.

And one thing… I’m going to cover a little bit longer in my weekend essay… The yuan is the currency that I’ve been paying attention to recently. The yuan exchange rate is 7.08 yuan per dollar… It has been steadily decreasing. Since September, the dollar has also turned strong against the euro… Nevertheless, the Chinese yuan is stronger than the dollar. For your information, the won-yuan exchange rate has jumped by 20 won in a few months, from 188 won to 207 won in June. Of course, the yuan has recently been more swayed by the weak yen, but I think we should also maintain a certain level of interest in the yuan exchange rate. This is the essay line today. Thank you.