As the number of overseas individual investors, known as 'seihakgaemi,' increases, projections suggest that the won-to-dollar exchange rate may once again enter the 1400 won range.
Park Soo-yeon, a researcher at MERITZ Securities, noted in a report titled 'Mrs. Watanabe and overseas individual investors' on the 22nd that the won-to-dollar exchange rate is expected to remain at a high level between 1340 and 1420 won in the second half of this year. Park said, 'The won-to-dollar exchange rate is settling in the 1390 won range, coming close to 1400 won,' adding, 'There are no signs of a trend reversal, so it could return to the 1400 won level by August.'
While there are many factors influencing the exchange rate, the so-called 'investment account deficit' was identified as a key factor. Following the burst of Japan's economic bubble in the 1990s, currency liberalization coincided with the expansion of yen carry trade, a method of borrowing yen at low interest rates to invest in countries or products with relatively higher interest rates. Individuals who actively used the yen carry trade were dubbed 'Mrs. Watanabe.'
Despite Japan's current account surplus, the background for the rising yen-to-dollar exchange rate continues to be the weakness of the yen. Park said, 'While Mrs. Watanabe did not affect the yen-to-dollar exchange rate, the Bank for International Settlements (BIS) analyzed that yen carry trade has caused a concentration on dollar purchases, which has raised the yen-to-dollar exchange rate by at least 5 to 10 yen.'
Park explained that Korea is in a similar situation. Although there is a current account surplus, as individuals investing in overseas stocks increase while the domestic stock market remains stagnant, the investment account deficit has solidified.
In particular, corporations are accumulating foreign currency deposits in anticipation of exchange rate volatility amid increasing external uncertainties. This means that even with a growing current account surplus, it does not immediately result in dollar sales.
Park stated, 'In summary, as individual overseas investments increase, the structure of the investment account deficit has become established, while corporations are delaying the sale of export proceeds (dollars), thus diminishing the exchange rate influence of the current account.'
He added, 'During uncertain times like now, it's difficult to bet on the direction of the exchange rate, so the supply and demand influence is bound to grow,' stating, 'Unless the loss of trust in the U.S. leads to a decline in American investment attractiveness, the won-to-dollar exchange rate will maintain a high level.'