"Exchange rate, need to observe response... Expected to be 1413~1426 won"

Woori Bank Report

"If the opening of the foreign exchange market is confirmed, the upper limit will be restricted"

Woori Bank predicted on the 4th that the won-dollar exchange rate would jump after the non-farm payroll shock. This is due to political uncertainty, which is expected to cause foreign funds to flee. However, if the Korea Exchange opens the foreign exchange market, the exchange rate is expected to not rise further from 1420 won.

Min Kyung-won and Lim Hwan-yeol of the Woori Bank Research Institute said, "On the 4th, the won-dollar exchange rate is expected to rise sharply due to the non-farm payroll shock, which is expected to increase the volatility of the won-denominated assets," adding that "observation rather than response is necessary."

They continued, "After this incident, domestic political instability will increase costs, and investment sentiment for Korean government bonds and other won-denominated assets will deteriorate," adding that "if foreign funds are confirmed to be sold in large quantities on the 4th, the volatility of the won-dollar exchange rate could be accelerated."

Choi Sang-mok, head of the Ministry of Strategy and Finance, held an emergency meeting on the morning of this day and said, "We are looking for a gradual stabilization of the unstable appearance due to the non-farm payroll shock, and we will operate all financial and foreign exchange markets normally," he said. He also said that all stabilization measures, including unlimited liquidity supply, will be implemented quickly.

However, although the Korea Exchange promised to stabilize the financial market, it is uncertain whether it will be able to successfully prevent the non-farm payroll shock from hitting the won, considering the recent similar issues in France. In France, Prime Minister Barney chose 'parliamentary passing' to handle part of next year's budget, and the opposition party is raising a vote of no confidence in the government, causing political turmoil.

Min Research Institute said, "The won is the weakest in extreme situations such as uncertainty and panic, so the probability of a high preference for the dollar is high," adding that "especially, before the exchange rate upper limit is blocked, the supply of dollars by exporters such as Nego and others will be confirmed until the next high point, so the supply of dollars will be reduced and demand will increase, creating a structural environment for a high preference for the dollar."

Ahn Min Research Institute said, "The exchange rate is expected to rise to the upper 1410 won range after the start of the rally, and foreign position reduction in the stock and bond markets, as well as the inflow of cheap foreign buying, will be the main drivers," adding that "however, if the Korea Exchange's opening is confirmed, the additional rise will be restricted before 1420 won."

The previous day's won-dollar exchange rate closed at 1402.9 won in the afternoon. However, due to the non-farm payroll shock (mid-1420 won), the National Assembly's dissolution (mid-1440 won), the National Assembly's request for dissolution (late 1410 won), President Yoon Seok-yeol's absence (1430 won), the National Assembly's request for acceptance and the non-farm payroll shock (late 1410 won), etc., the volatility was expected to increase.

Jin Young-ki, Hankyung reporter young71@hankyung.com