In December, from the 1st to the 20th, the enrollment amount for exchange rate insurance soared to 151.6 billion won. This represents a 94% increase compared to the entire amount in December last year, which was 78.3 billion won. The significant rise in enrollment is taking place against a backdrop of heightened economic uncertainty and fluctuating exchange rates, attracting the attention of companies involved in international trade.
The Korea Trade Insurance Corp. (K – SURE) reported on December 25 that the enrollment amount within the first 20 days of this month reached 151.6 billion won. The won – dollar exchange rate has been volatile recently. In the first week of this month, the exchange rate climbed to the 1,410 won level, resulting in an enrollment amount of 56.8 billion won. By the third week, the exchange rate exceeded the 1,450 won level for the first time in 15 years after the U.S. Federal Reserve’s decision to lower its forecast for the number of interest rate cuts next year from four to two. This pushed the enrollment amount to 70.6 billion won.
A K – SURE representative noted that when the exchange rate rises, export companies tend to increase their enrollment. This trend is clearly reflected in the current figures, demonstrating the increased demand for financial products that offer stability in the face of volatile market conditions.
Moon Da – woon, a researcher at Korea Investment & Securities, pointed out the ongoing pressure for a weak won. He said that during the process of handling the impeachment bill, the unique pressure for a weak won is likely to continue at least until the first quarter of next year. He also mentioned that the weakening of negotiation power due to the lack of leadership in the government during the early days of Donald Trump’s administration, and the downward adjustment of next year’s economic growth rate expectations for Korea are likely to increase the pressure for a weak won.
Jung Yeo – kyung, a researcher at NH Investment & Securities, highlighted the possibility of the won – dollar exchange rate surpassing the 1,500 won mark. She explained that in the worst – case scenario, the won – dollar exchange rate could exceed the 1,500 won mark due to foreign investors avoiding political uncertainty and the acceleration of domestic investors’ overseas securities investment towards advanced countries, leading to a sharp decline in foreign exchange reserves as policy authorities intervene to prevent this.
The annual enrollment amount for exchange rate insurance from the start of this year to December 20 has increased by 10.7% compared to last year, reaching 1.4163 trillion won. The annual enrollment amount for exchange rate insurance this year is expected to be around 1.5 trillion won, indicating strong demand for financial protection against exchange rate volatility. The current economic situation, with exchange rate levels not seen in 15 years, is reminiscent of the 2008 financial crisis. The political uncertainty surrounding the impeachment bill has further exacerbated the situation, leading to increreased demand for exchange rate insurance as companies try to manage risks in international trade.
Related topics
