The won-dollar exchange rate has surpassed 1,450 won, and the value of the won has been declining daily, reaching its lowest level in 15 years. Amid this economic turmoil, investors are focusing on dollar-denominated bonds as an alternative to protect the value of their assets and generate revenue. Dollar-denominated bonds are rapidly emerging as attractive assets that can offer stable interest income along with potential foreign exchange gains due to rising exchange rates.
Following President Trump's re-election, the strong dollar policy has been fully implemented, further strengthening the economic advantage of the United States. Along with the interest rate hike trend of the Federal Reserve, the dollar has solidified its status as a more robust reserve currency. Global capital is flocking to dollar-based assets, which in turn accentuates the value of dollar-denominated assets.
On the other hand, the South Korean economy cannot avoid the weakening of the won due to trade deficits, outflow of foreign investment capital, and political instability. This economic environment decreases the real value of assets held in won, prompting investors to feel the need to shift to dollar-based assets.
Dollar-denominated bonds are particularly standing out in this environment. Recently, the monthly interest rate of dollar-denominated bonds surged from the previous 1.3% to 2.4%, providing high revenue. At the same time, the additional foreign exchange gains resulting from rising exchange rates are making dollar-denominated bonds not just a defensive asset but an active revenue-generating asset.
Financial experts analyze that the strong dollar trend is likely to continue for at least two more years. This is because the interest rate hike trend in the United States and the economic policies of the Trump administration are having a sustained impact on global economic flows. Experts emphasize that in such a situation, dollar-denominated bonds are one of the most effective means of preparing for exchange rate volatility and maintaining asset value.
During past financial crises, dollar-denominated bonds were used as a primary means of asset protection. During the 1997 IMF currency crisis and the 2008 global financial crisis, dollar-denominated bonds played a significant role by providing investors with stable cash flow and asset value. Even in the current economic situation, dollar-denominated bonds are assessed as assets fulfilling both objectives of asset protection and revenue generation.
Now that exchange rate volatility is extreme, dollar-denominated bonds have established themselves as essential investment sources providing both stability and revenue to investors. Experts advise, "In a situation where the value of the won continues to decline, dollar-denominated bonds are the optimal alternative to defend asset value and expect additional foreign exchange gains."