Oh Geon-young: "Even ghosts can't predict exchange rates… set dollar allocation by long-term growth"

He holds that so many variables are intertwined that accurately forecasting the future is difficult. Acknowledging how hard exchange-rate forecasting is, he warned investors not to get stuck on the short term.

He explained that exchange-rate movements are extremely hard to predict, and that hasty bottom calls can instead expose investors to risk. He stressed that a long-term approach is what matters.

As a second factor pushing the rate down, he cited increased dollar inflows. When dollars from the ADR issued by SK hynix in the US flow into Korea, holders sell dollars and buy won, which releases domestic dollar exchange demand and pressures the rate lower. He also explained that inflows of foreign capital seeking Korean bonds, prompted by inclusion in the WGBI (World Government Bond Index), add to dollar inflows.

It is generally said that a stronger won, as the rate falls, makes exports harder, but he argued this must be viewed in relative terms. For example, even if Korea faces a 10% tariff, if competitors face 20%, Korea may end up in a favorable position. He stressed that a falling exchange rate does not directly translate into weaker export competitiveness.

If the yen, euro and yuan are also strong against the dollar, the negative impact of a stronger won on Korean exports may be offset. He added that it is hard to conclude that exports will falter from won strength alone.

In that case, Korean exports would struggle, dollar inflows would decline, and the rate could rise again. He emphasized that a stand-alone currency strength in one country is hard to sustain.

He explained that Japan, too, is raising expectations of yen strength and intervening alongside the US. He noted that this US-Japan coordination helped push the rate down a further step from the 1,430 range it had previously reached.

First, the Bank of Korea's shift toward a tighter monetary policy stance. Second, rising foreign capital inflows. Third, joint US-Japan intervention to drive yen strength. He analyzed that these combined factors have pushed down the Korean exchange rate.

As one fundamental reason exchange rates are hard to predict, he pointed to government intervention. Unlike stock or interest-rate markets, the term "currency manipulator" exists, and governments often intervene directly in exchange rates outside market logic. Citing US intervention against yen weakness as an example, he stressed that predicting such government psychology or policy shifts is nearly impossible. He added that the difficulty deepens because rates that should move by market principles can suddenly reverse, or several countries may push in the same direction.

To judge whether the movement of the Korean rate is sustainable, he explained, one must also look at how the currencies of other major economies such as Japan, China and the eurozone are moving. This is not a simple equation but more like a higher-order equation in which many variables act at once, making forecasts far more complex.

As an example of how hard forecasting is, he recalled the sudden plunge of the Taiwan dollar in May 2025. When the US and Taiwan announced a currency agreement (a stronger Taiwan dollar, a weaker US dollar), the won-dollar rate, which had been in the 1,470s, fell to the 1,350s within just two days. Taiwanese exporters sold the dollars they had held on expectations of dollar strength all at once, causing rapid swings, and he explained this shows how a shift in market expectations can trigger large exchange-rate moves in a short period.

He saw that if external factors such as yen strength combine, the rate could plunge in an instant in the FX market. He added that coordinated intervention by the Bank of Korea and the US and Japan could be an attempt to shake the existing expectation that the dollar will keep rising. He explained this could make dollar-holding companies sell dollars to avoid losses.

He recalled that many investors now expect a short-term dollar rebound, but similar expectations existed around the 1,450 level.

He explained that the long-term exchange rate tends to converge toward each country's potential growth rate. He noted that Korea's potential growth is steadily falling as it enters an aging society, while the US holds the edge in technological competitiveness. He said that if Korea secures a firm position in the AI era and grows robustly, the rate could fall over the long run, but if it fails and the US grows stronger, the rate could stay at an even higher level than today. Because of this future uncertainty, he stressed the need for diversification and probability-based investing through a portfolio.

For example, if there is a 50% chance the US will be more competitive in 10 or 20 years and a 50% chance Korea will be, he explained, it is appropriate to make 50% of the portfolio dollar assets.

This gives investors a wide range of choices and can help manage risk through diversification.

Bonds are more directly affected by exchange-rate moves, but stocks move much more on company earnings and industry trends, so the approach should differ.

Geopolitical risks usually push gold prices up, but despite recent geopolitical risks such as the Middle East war, gold fell, which he attributed largely to US interest rates. Because gold pays no interest while the dollar offers a rate, he analyzed that as early-year expectations of rate cuts turned into expectations of rate hikes, gold fell from a peak of 5,500 to 4,000.

First, expectations that slowing US growth and employment may keep the Fed from hiking as much as expected. Second, accelerating gold purchases by central banks worldwide. Third, growing concern over the US's massive fiscal deficit. He explained that with US national debt expected to exceed $40 trillion, doubts about the long-term value of the dollar are growing.

Doubts about the dollar, the currency of a heavily indebted country, may grow over time, which could lead to dollar weakness, he analyzed. He added that concern over the US fiscal deficit is therefore one factor supporting gold prices.