Today, I was checking the won-dollar exchange rate and had to double-check my eyes. 1,335 won for 1 dollar?

Just a little while ago, it was over 1,500 won, and there were many discussions about the dire state of the Korean economy, so it feels strange to see it drop like this.

I am a 44-year-old man living in LA. Living in the U.S., the Korean exchange rate is both an economic indicator that appears in the news and a number that is connected to daily life.

Whether sending money to Korea or buying goods from Korea, the difference in exchange rates is significant when converting Korean won to U.S. dollars.

But if the exchange rate drops from 1,500 won to 1,335 won, who actually benefits and who suffers?

First, I calculated the numbers.

If 1 dollar is 1,500 won, sending 10,000 dollars from the U.S. to Korea would amount to 15 million won. However, at 1,335 won, it would only be 13.35 million won.

It's the same 10,000 dollars, but there's a difference of 1.65 million won. Of course, actual remittances incur fees and exchange margins, but strictly speaking, that's the difference based on the exchange rate.

For those earning dollars in the U.S. and sending money to Korea, a drop in the exchange rate is not welcome. Their salary remains the same in the U.S., but the amount converted to Korean won decreases.

On the other hand, parents sending tuition or living expenses to their children studying in the U.S. have a completely different situation.

To send 10,000 dollars to their children in the U.S., they used to need 15 million won, but now they only need 13.35 million won. This reduces their financial burden.

Koreans preparing to travel to the U.S. also benefit. Costs paid in dollars, such as hotel fees, rental cars, and meals, become cheaper when converted to won.

Korean Companies Experience Mixed Fortunes

Companies in Korea that import crude oil, natural gas, and various raw materials in dollars welcome the strengthening of the won.

Even when importing goods worth 1 million dollars, if the exchange rate drops, the amount they need to pay in won decreases.

This change can help lower the prices of some imported goods or production costs over time.

However, Korean companies exporting products to the U.S. are on the opposite end of the spectrum.

If we assume a company earns 1 million dollars in the U.S., at an exchange rate of 1,500 won, that would be 1.5 billion won, but at 1,335 won, it would be 1.335 billion won.

The amount converted from dollar sales to won decreases by 165 million won.

That doesn't mean the company actually incurred a loss of 165 million won. Revenue decline and actual operating losses are entirely different concepts.

If an exporting company purchases raw materials in dollars overseas, a drop in the exchange rate can also reduce cost burdens.

However, if the selling prices of products remain the same while most labor and production costs are incurred in won, profitability may decline.

Ultimately, a stronger won does not necessarily mean losses for all exporting companies.

The impact varies depending on the proportion of dollar sales and dollar costs, whether they hedge against exchange rates, and their overseas production structure.

What About Dollar Investors in Korea?

For Koreans investing in U.S. stocks, the exchange rate is also important.

For example, even if the price of U.S. stocks does not change at all, if the value of the dollar drops, the value of their investment when converted to won decreases.

Conversely, if someone living in the U.S. holds Korean stocks or real estate in won, the strengthening of the won can increase the value of their assets when converted to dollars.

Ultimately, even with the same exchange rate change, the outcome varies depending on which country's currency one earns in, which currency one spends, and in which currency one holds assets.

Is a Lower Exchange Rate Ultimately a Good Thing?

Personally, I believe that stability in the exchange rate is more important than whether it is high or low.

If the exchange rate rises sharply, the burden of import prices in Korea can increase, and conversely, if it falls rapidly, it can create burdens for exporting companies or those holding dollars.

Also, just because the exchange rate has dropped to 1,335 won doesn't mean that the prices of American products or fuel in Korea will drop by that much immediately.

Factors such as company inventory, contract timing, taxes, and distribution costs all play a role.

Living in LA, I find the exchange rate to be quite peculiar.

When sending money to Korea, I prefer a high dollar value, but when bringing money from Korea to the U.S., I prefer a low dollar value.

Ultimately, people tend to wish for the exchange rate to move in a direction that benefits them.

So, just because the exchange rate exceeded 1,500 won doesn't mean everyone suffered, and just because it dropped to 1,335 won doesn't mean everyone benefits.

For some, it's a saving of 1.65 million won, but for others, it's a decrease of the same 1.65 million won.

It's fascinating to realize how many people's interests are intertwined with a single number like the exchange rate.