금융시장
Long-term outlook on the Won/Dollar Exchange Rate
2010-03-05SONG, Kyoung-Hee
목차
요약
The won/dollar exchange rate will be under continuing downward pressure in 2010
The won/dollar exchange rate remained high in early 2009 due to the lingering effects
of the financial crisis, but fell to the high 1,100 won range by the end of 2009 as markets stabilized and foreign exchange supply and demand conditions improved.
In 2010, the won/dollar exchange rate is expected to continue to decline since the dollar is expected to weaken as Asian currencies strengthen, domestic fundamentals (i.e. the current account surplus), are expected to be strong, and the won is currently undervalued.
However, the decline will be gradual and reach the 1,100 won range due to factors such as the temporary rebound in the dollar and the contracting current account surplus.
In the mid-to-long term, Asian currencies may strengthen as the dollar weakens
The dollar is currently strong due to investors' preference for safe assets, but is now in the 2nd stage of the weakening cycle that began in 2001 (high volatility and gradual decline).
Since the dollar cycle is about 10 years, a rebound is possible around 2012. However,
further declines before then are more likely.
This is because of the U.S.'s massive current account and fiscal deficits and growing doubts over the role of the dollar as the reserve currency following the subprime crisis. In fact, many countries are already diversifying their foreign reserves with non-dollar currencies.
The dollar will weaken against Asian currencies due to Asia's rapid economic recovery and steady capital inflows. Also, the yuan will begin to appreciate meaningfully in 2010.
The won/dollar exchange rate will decline toward the pre-crisis level of 900 won
According to a simple regression analysis against the current account and REER, the nominal won/dollar exchange rate will fall below 1,000 won in 2011~2012.
However, the real exchange rate is likely to decline at a faster pace due to the continuing growth of foreign capital inflows, revaluation pressure following the excessive depreciation of the won during the financial crisis, and the appreciation of the yuan
The won/dollar exchange rate remained high in early 2009 due to the lingering effects
of the financial crisis, but fell to the high 1,100 won range by the end of 2009 as markets stabilized and foreign exchange supply and demand conditions improved.
In 2010, the won/dollar exchange rate is expected to continue to decline since the dollar is expected to weaken as Asian currencies strengthen, domestic fundamentals (i.e. the current account surplus), are expected to be strong, and the won is currently undervalued.
However, the decline will be gradual and reach the 1,100 won range due to factors such as the temporary rebound in the dollar and the contracting current account surplus.
In the mid-to-long term, Asian currencies may strengthen as the dollar weakens
The dollar is currently strong due to investors' preference for safe assets, but is now in the 2nd stage of the weakening cycle that began in 2001 (high volatility and gradual decline).
Since the dollar cycle is about 10 years, a rebound is possible around 2012. However,
further declines before then are more likely.
This is because of the U.S.'s massive current account and fiscal deficits and growing doubts over the role of the dollar as the reserve currency following the subprime crisis. In fact, many countries are already diversifying their foreign reserves with non-dollar currencies.
The dollar will weaken against Asian currencies due to Asia's rapid economic recovery and steady capital inflows. Also, the yuan will begin to appreciate meaningfully in 2010.
The won/dollar exchange rate will decline toward the pre-crisis level of 900 won
According to a simple regression analysis against the current account and REER, the nominal won/dollar exchange rate will fall below 1,000 won in 2011~2012.
However, the real exchange rate is likely to decline at a faster pace due to the continuing growth of foreign capital inflows, revaluation pressure following the excessive depreciation of the won during the financial crisis, and the appreciation of the yuan
관련 보고서
#외환/환율
#경제전망