![]() The KRW will continue to depreciate through Q1 2023 due to the forces mentioned above. The KRW’s value has been steadily falling as the Fed’s aggressive interest rate hikes have drawn out foreign portfolio investments from the Korean market, and elevated costs for commodities (particularly oil and natural gas) have imposed a consistent trade deficit. ![]() Last week, the KRW:USD rate fell past the 1,300 mark for the first time since the aftermath of the 2008 financial crisis. The South Korean won has depreciated by over 10% relative to the US dollar since the start of the year. Furthermore, given the struggles firms currently face to secure inputs, raising production volumes to capitalize on a weak currency is no longer a given. Most firms in South Korea are currently unable to leverage the weakened KRW into higher sales volumes due to consistent upward pressure on input costs. ![]() MNCs should consider how these factors are likely to affect their local partners and determine if they pose any risks in the form of lower inventory holdings or through additional price increases to end-customers.Įxporters should not expect the usual benefits that come with a weak local currency due to the present high-inflation environment. As the won continues to trend downward over the coming months, firms selling to end-customers in the Korean market should expect a persistent squeeze on their bottom lines. The won is unlikely to make a meaningful recovery until Q2 2023įirms that import goods into South Korea will continue to face elevated costs associated with FX weakness.
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