Since the beginning of this year, the continuous strengthening of the US dollar has had a considerable impact on the exchange rates and economies of many Asian countries.
South Korean economics professors say the strengthening of the dollar has had a number of negative effects on the South Korean economy
The won fell more than 7 percent against the dollar, and for South Korea, whose economy is highly dependent on imports and exports, a strong dollar risks an international trade deficit, rising import prices and a loss of foreign exchange reserves.
The won has fallen more than 5.5% against the dollar so far this year, making it one of the worst-performing currencies in Asia. The decline of the Korean won against the US dollar reached its lowest point in mid-April, and on April 16, the day the won fell below the 1,400 mark, the Korean won fell by 7.3% against the US dollar for the year.
Choi Hee-ryul, a professor of economics at Gyeonggi University in South Korea, said that the continued strength of the dollar is not only due to the increase in inflation in the United States, but also due to the strong demand for the dollar brought about by the global instability. For South Korea, whose economic development is highly dependent on import and export trade, this means an increase in the price of imported goods. Although it can promote exports to a certain extent, Professor Cai believes that the negative impact is greater overall.
Choi Hee-ryul, professor of economics at Gyeonggi University in South Korea: [The strengthening of the dollar] has led to an increase in import prices, especially the recent rise in international oil prices and grain prices, and the Korean won exchange rate is also falling, so I think the negative impact on the Korean economy is even greater.
Bloomberg reported on the 7th that South Korea's exports rely heavily on raw material imports, but as the won continues to weaken, the cost of raw material imports is getting higher and higher, which will make many small and medium-sized enterprises that have not hedged their exchange rates and are overly dependent on external raw materials quite a headache.
South Korean public opinion is worried that the economic crisis in 1997 may be repeated
South Korea's foreign exchange reserves fell by the most in 19 months in April as South Korea intervened in the foreign exchange market to curb the weakness of the won. According to data recently released by the Bank of Korea, South Korea's foreign exchange reserves fell by about $6 billion in April, the largest decline in nearly two years. Historically, the South Korean economy, which is highly dependent on foreign countries, has always been vulnerable to the "triple high crisis" of high interest rates, high prices, and high exchange rates. Public opinion in South Korea is concerned that the current situation is similar to that faced before the 1997 economic crisis, and that South Korea must remain vigilant.
Tang Xin: South Korean public opinion has noticed the rapid loss of foreign exchange reserves in some Asian countries, including South Korea, and South Korean society still remembers the financial and foreign exchange crises that swept Asian countries in 1997. Some media are worried that if the South Korean government does not take effective measures to deal with the situation it is facing, it is feared that the situation of 1997 will be repeated in the future.
Indonesia has taken steps to de-dollarize and promote a pluralistic monetary system
In Indonesia, the depreciation of the currency has led directly to increased inflation, so how is Indonesia coping with this situation?
If the U.S. delays in cutting interest rates, inflation in Indonesia will intensify further.
Tauked Ahmed, Executive Director of the Indonesian Institute of Economic and Financial Development: If inflation in the United States remains at a high level, it means that the decision to cut interest rates in the United States will take longer, and the Indonesian currency will be volatile.
Indonesia's consumer price index (CPI) rose 3.05% year-on-year in March, hitting a seven-month high. Indonesia's household consumption accounts for about 50% of gross domestic product (GDP), and the country's economy could be in danger of contracting if inflation rises. Ahmad said the Indonesian government is taking steps to de-dollarize, while suggesting that countries should reduce the use of the dollar in trade and promote a diversified monetary system.
Taukid Ahmed, Executive Director, Indonesian Institute for Economic and Financial Development: The Indonesian government has actually started to implement a de-dollarization policy. I think the BRICS cooperation mechanism can be a way out, and the key is to agree to use national currencies for trade in goods and services. For example, transactions with Malaysia and Singapore are conducted in local currencies instead of the US dollar, which is an intermediate currency. For example, we trade with them in Indonesian currency, and we trade with China in RMB.
The yen continues to depreciate, and the Japanese people shout "can't afford it"
Recently, the yen once fell below the 160 yen to 1 dollar mark against the dollar, and prices rose, and many Japanese consumers shouted "can't afford it".
Local residents: When you reach out to buy it, you find that the price is ridiculously high, and sometimes you will give up on it.
Local residents: Fruit is also a bit expensive, so I didn't buy it. Although the children said they wanted to eat it, it was too expensive, so I didn't buy it.
According to a recent survey by the Imperial Data Bank, a private research agency in Japan, the cost of imported raw materials in Japan has increased due to the depreciation of the yen, and the average price increase of more than 400 food products in May this year has been as high as 31 percent, of which the price of some olive oil has increased by 80 percent. Soaring prices have had a major impact on household consumption.
Koichi Fujishiro, economist, Dai-ichi Institute of Life Economics, Japan: Most of Japan's food and energy are imported. With the depreciation of the yen, import prices have risen rapidly, resulting in higher prices for electricity, gas, and food.
Japanese expert: It is difficult for the Japanese government to completely reverse the decline of the yen by intervening in the foreign exchange market
In the face of the continued depreciation of the yen, the Japanese government and the central bank seem to be unable to sit still. Since April 29, when the yen fell to a 34-year low against the dollar, it has seen rapid appreciation. According to a report by TV Tokyo on the 9th, a relevant source from the Japanese government said that on April 29 and May 2, the Japanese government and the central bank intervened in the foreign exchange market twice. However, Koichi Fujishiro said that it will be difficult to completely reverse the decline of the yen.
Koichi Fujishiro, economist, Dai-ichi Life Economic Research Institute, Japan: At present, the United States still adopts a monetary policy of high interest rates, and even if Japan intervenes in the foreign exchange market with a scale of about 8 or 9 trillion yen, it will be difficult to completely reverse the decline of the yen, and it will only buffer the sharp decline of the yen.
Japanese experts: The yen continues to weaken, and Japan has no good way to deal with it for the time being
Fujishiro pointed out that in view of the current weakening of the yen caused by the interest rate differential between the United States and Japan, Japan now has no good means to deal with it, and may only hope for a U.S. interest rate cut.
Koichi Fujishiro, economist at Dai-ichi Life Economic Research Institute, Japan: First, it intervenes in the foreign exchange market, but the US dollar foreign exchange reserves that can be used are limited; Second, the Bank of Japan tightens monetary policy to raise interest rates, but in this way, Japan's domestic economy will cool down rapidly, and the rise of the yen exchange rate will have a huge price, so the Japanese government and the central bank can only be patient and wait for the United States to cut interest rates.
However, Minneapolis Fed President Kashkari and Boston Fed President Collins said on the 7th and 8th, saying that because "inflation is still firm", the Fed may need to "maintain a higher interest rate policy for a longer time".
(Source: CCTV News)