[Edaily Reporter Lee Jeong-yoon ] As the won continues to strengthen on the back of robust semiconductor exports, large-scale year-end dividend repatriation is emerging as a variable in the downward trend of the won-dollar exchange rate. With foreign investors’ dividend repatriation expected to reach up to $12.6 billion, combined with various sources of dollar demand, the exchange rate is projected to become more volatile.

On the 5th, the won-dollar exchange rate closed at 1,342.1 on the Seoul foreign exchange market, up 0.6 won from the previous trading day. The exchange rate has remained in the 1,300-won range for about two months since falling below 1,400 won in mid-August. On the 26th of last month, it dropped to 1,320.6 won during trading hours, setting a new low for the year, but the downward trend has recently stalled due to factors such as the U.S. midterm elections and volatility in global financial markets.

Changes in dollar supply and demand are also expected in the foreign exchange market as the year-end approaches. This is because large-scale dividend payments by Samsung Electronics and SK Hynix are scheduled, which could significantly increase demand for dollars as foreign investors repatriate dividends.

According to a Citibank report, the total dividends to be paid by Samsung Electronics and SK Hynix from late November through December are estimated at 44.1 trillion won. Of this amount, approximately 22.4 trillion won will go to foreign investors. If 70–90% of the 18.7 trillion won remaining after a 16.5% tax deduction is converted into dollars and remitted overseas, the scale of these remittances is expected to reach 13.1 trillion to 16.8 trillion won, or approximately $9.8 billion to $12.6 billion.

This is a larger scale than during the typical dividend season in April and May. Foreign dividend remittances from April to May of this year totaled $6.9 billion; if year-end remittances increase as expected, they could reach up to twice that amount. In particular, the proportion of foreign investors’ after-tax dividends remitted overseas rose from 66% in 2020 to 87% last year, reaching 89% from January through August of this year. Analysts suggest that as the share of dividends remitted overseas—rather than reinvested domestically—has increased, upward pressure on the dollar could intensify toward the end of the year.

Other factors affecting dollar supply and demand are also on the horizon. Key variables include domestic investors’ demand for dollars stemming from U.S.-based Anthropic’s planned initial public offering (IPO), as well as the inflow and outflow of foreign capital resulting from the Morgan Stanley Capital International (MSCI) index rebalancing scheduled for the end of this month.

Lee Min-hyuk, an economist at KB Kookmin Bank, said, “Even if only half of Samsung Electronics’ foreign dividends are converted into dollars, it would generate more than $5 billion in buying demand,” adding, “There is a possibility that temporary dollar buying pressure will intensify, and in the short term during November, upward volatility in the exchange rate could increase.”

The possibility that the National Pension Service (NPS) may reduce its currency hedging to mitigate foreign exchange risk is also cited as a factor affecting the exchange rate. As the won strengthens, the NPS’s hedging ratio is declining; if the NPS proceeds to buy dollars in the spot foreign exchange market in the future, this could act as a factor limiting the decline in the exchange rate.

However, despite these short-term supply-and-demand pressures, the prevailing view is that the won’s appreciation trend will continue. The assessment is that the supply of dollars resulting from the semiconductor export boom and large trade surpluses is outpacing capital outflows from foreign investors selling stocks and demand for overseas investments from domestic investors.

Kim Jin-wook, an economist at Citibank, stated, “The pressure from exporters selling dollars is outweighing the capital outflow pressure caused by foreign investors selling stocks and domestic retail investors investing overseas,” adding, “The exchange rate is expected to fall to 1,300 won within the next three months and to 1,270 won within six to 12 months.”

Park Sang-hyun, an analyst at iM Securities, also noted, “While artificial intelligence (AI) and risks related to Iran are putting upward pressure on the exchange rate, strong export performance, a widening trade surplus, and relatively sound fiscal health will act as additional downward pressure on the exchange rate.” However, he added, “If the military conflict between the U.S. and Iran drags on and causes international oil prices to surge further, there is a possibility that the exchange rate could spike sharply in the short term.”