High Exchange Rate Pushes Up Prices Despite Authorities' Intervention

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The won-dollar exchange rate closed at 1,535 won in daytime trading, marking its first decline in four trading days. Although it climbed as high as 1,555 won shortly after the market opened, it shifted to a downward trend following intervention by the authorities.

Reporter Lee Tae-kwon has the story.

[Reporter]

This is a small and medium-sized manufacturing company that produces food packaging materials.

Its main raw materials include polyethylene, which is extracted from naphtha.

With raw material prices soaring due to the war in the Middle East and the exchange rate rising, the costs have become a significant burden.

[Jung Hee-gook / CEO of a food packaging company: Because of the oil crisis, (raw material) prices have risen by 55%, and with the exchange rate also climbing, it adds another 5 to 6% to our burden.]

Franchise coffee shops, which must import coffee beans and other supplies, have raised prices one after another, citing the high exchange rate.

[Park Sun-woo / Yongsan-gu, Seoul: Even 100 or 200 won can add up to a large amount if you drink a few cups. So, I think it feels quite significant.]

At airport currency exchange counters, the won-dollar rate has surpassed 1,600 won, increasing the burden on travelers.

A high exchange rate drives up the prices of imported goods, ultimately leading to a heavier burden on consumers.

Research suggests that a 10% rise in the exchange rate increases the consumer price inflation rate by approximately 0.3 to 0.5 percentage points.

The high-flying won-dollar exchange rate is driven by the strengthening dollar amid growing possibilities of a U.S. interest rate hike, as well as a surge in demand for dollar conversion after foreign investors net sold 69 trillion won worth of domestic stocks over the past month.

Financial authorities are also focusing on speculative forces betting on the rising exchange rate and export companies that are not converting dollars earned overseas.

[Seok Byoung-hoon / Professor of Economics, Ewha Womans University: Export companies that should be supplying dollars need to fulfill investments in the U.S., so they don't have a need to convert dollars into won. This is causing a supply-demand imbalance, leading to a sharper rise.]

While foreign exchange authorities have managed to put out the immediate fire through intervention, the external factors driving the exchange rate higher remain strong, making it difficult to change the trend in the short term.

(Reported by Kim Hak-mo | Video by Jung Yong-hwa | Graphics by Jang Chae-woo)
※ Please note: This article was translated by AI and may contain errors.