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monger
Joined: 09 Oct 2008
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 Posted: Thu Oct 16, 2008 5:47 pm Post subject: |
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| so would you say it is best to change before Tues? |
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JFuller317
Joined: 10 Oct 2008
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| Posted: Thu Oct 16, 2008 6:17 pm Post subject: |
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| Why are all these idiots in the financial sector trying to buy dollars anyway? I can't believe these people are willing to take a 30-40% loss just to shore up their reserves of this currency the "dollar." These morons should just sit on their won. That's the whole thing about financial markets that just makes me sick: what might be rational for one single person to do becomes extremely irrational for everyone to do. |
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marlow
Joined: 06 Feb 2005
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| Posted: Thu Oct 16, 2008 6:32 pm Post subject: |
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| JFuller317 wrote: |
| Why are all these idiots in the financial sector trying to buy dollars anyway? I can't believe these people are willing to take a 30-40% loss just to shore up their reserves of this currency the "dollar." These morons should just sit on their won. That's the whole thing about financial markets that just makes me sick: what might be rational for one single person to do becomes extremely irrational for everyone to do. |
They don't have a choice. It's industries and banks needing to roll over debt. Did you read the article I linked to on page 23 and another member pasted on page 24? |
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JFuller317
Joined: 10 Oct 2008
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| Posted: Thu Oct 16, 2008 6:52 pm Post subject: |
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| So they absolutely have to make payments on this short-term debt in dollars? But then what was the catalyst for the drop? Weren't they also paying off their short-term debt back when the won was at 1000 to 1 against the dollar? Sorry if I'm a little ignorant about the fundamentals of exchange rates. |
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marlow
Joined: 06 Feb 2005
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| Posted: Thu Oct 16, 2008 6:58 pm Post subject: |
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| JFuller317 wrote: |
| So they absolutely have to make payments on this short-term debt in dollars? But then what was the catalyst for the drop? Weren't they also paying off their short-term debt back when the won was at 1000 to 1 against the dollar? Sorry if I'm a little ignorant about the fundamentals of exchange rates. |
The debt is due for re-negotiation or payment this quarter, but seems to have been taken out in 2005. If it's foreign they have it held in US dollars I guess. The catalyst is that money is not available right now, and if it is, it's expensive (high interest). I'm not a whiz either, but this is my simplistic understanding. |
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JFuller317
Joined: 10 Oct 2008
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| Posted: Thu Oct 16, 2008 7:16 pm Post subject: |
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| So the falling exchange rate is essentially due to these banks "bidding up" the dollar? And they have to do this, there's no breaking point? For example, I'd rather give my money away than ever take it back to the States at a 1600 to 1 exchange rate, but these banks absolutely have to have dollars to the degree that they'd bid the dollar up to a 1800 or 2000 rate? It just seems like there should be some breaking point at which people would just stop selling won, but you're saying that their hands are tied? |
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bassexpander
Joined: 13 Sep 2007
Location: Someplace you'd rather be.
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| Posted: Thu Oct 16, 2008 8:31 pm Post subject: |
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| Well, I just withdrew another 800,000 won from an ATM at a 7/11 down the street. I'm getting a 1,385 exchange rate on it for some strange reason! I'm beginning to think that rate is taken from an average with last week's high of 1450 or whatever. This happens to be a non major bank machines, which are giving me much crappier rates. |
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Tobias
Joined: 02 Jun 2008
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| Posted: Thu Oct 16, 2008 10:58 pm Post subject: This is why you should wait |
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| bassexpander wrote: |
| Well, I just withdrew another 800,000 won from an ATM at a 7/11 down the street. I'm getting a 1,385 exchange rate on it for some strange reason! I'm beginning to think that rate is taken from an average with last week's high of 1450 or whatever. This happens to be a non major bank machines, which are giving me much crappier rates. |
I've seen that before here.
This is the reason you should wait until all the volatility subsides and the won settles down to a more stable rate. Even the banks don't know what the exchange rates are instantaneously when rates are changing as fast as they have been of late. |
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bassexpander
Joined: 13 Sep 2007
Location: Someplace you'd rather be.
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| Posted: Thu Oct 16, 2008 11:41 pm Post subject: Re: This is why you should wait |
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| Tobias wrote: |
| bassexpander wrote: |
| Well, I just withdrew another 800,000 won from an ATM at a 7/11 down the street. I'm getting a 1,385 exchange rate on it for some strange reason! I'm beginning to think that rate is taken from an average with last week's high of 1450 or whatever. This happens to be a non major bank machines, which are giving me much crappier rates. |
I've seen that before here.
This is the reason you should wait until all the volatility subsides and the won settles down to a more stable rate. Even the banks don't know what the exchange rates are instantaneously when rates are changing as fast as they have been of late. |
My father and I are coordinating/talking as he checks rates there vs. here, upping my limit on the card, etc. We've figured out that through this machine, the rate from the previous day's close is what I'll get on this one bank card. So when the won goes to poop one day, I know to withdraw money here that evening and the next morning for the best rate.
There is a Woori bank right outside of my house. I check the rates on that, and they're never as good as what I can get from this ATM. According to my home bank, they can send a large transfer here, but the bank may take up to a few days to do it. That may mean the rate could be anything by that time. The ATM route (with this machine and card) seems to work well for me at the moment!
If it means anything, I've noticed that KB Bank seems to have even slightly better rates than Woori... there is a KB here too. |
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DCJames
Joined: 27 Jul 2006
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| Posted: Fri Oct 17, 2008 12:00 am Post subject: |
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| JFuller317 wrote: |
| It just seems like there should be some breaking point at which people would just stop selling won, but you're saying that their hands are tied? |
There's no "breaking point" for people to stop selling won for sky high rates because we don't know the bottom yet. Two months from now the price of 1600-1800 won might be a bargain.
And based on the fact that economies of countries around the world are just now starting to fall around the world. There's a mad dash to buy security in the form of US dollars right now, driving the price of the dollar even higher. Korea is a major exporter to the US with transactions done in US dollars and the Korean dependence on the dollar will never change.
I'm expecting the Korean won to fall even further. |
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bassexpander
Joined: 13 Sep 2007
Location: Someplace you'd rather be.
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| Posted: Fri Oct 17, 2008 12:28 am Post subject: |
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| DCJames wrote: |
| JFuller317 wrote: |
| It just seems like there should be some breaking point at which people would just stop selling won, but you're saying that their hands are tied? |
There's no "breaking point" for people to stop selling won for sky high rates because we don't know the bottom yet. Two months from now the price of 1600-1800 won might be a bargain.
And based on the fact that economies of countries around the world are just now starting to fall around the world. There's a mad dash to buy security in the form of US dollars right now, driving the price of the dollar even higher. Korea is a major exporter to the US with transactions done in US dollars and the Korean dependence on the dollar will never change.
I'm expecting the Korean won to fall even further. |
I'm expecting a weekly to bi-weekly see-saw for quite a while. I don't see it dropping that low.
For one, Korea's bank outlook was reconsidered by Moody's to be strong enough. That helped the won today. On another note, there's this development:
http://english.yonhapnews.co.kr/business/2008/10/17/84/0503000000AEN20081017006800320F.HTML
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2nd LD) BOK to adopt open bidding for won-dollar swaps
혻 혻 SEOUL, Oct. 17 (Yonhap) -- South Korea's central bank said Friday it will introduce an open bidding system for won-dollar swaps in an effort to supply more dollar liquidity to the local market.
혻 혻 The move comes as domestic banks face a severe dollar shortage, hit by the global credit crunch. Currently, the Bank of Korea (BOK) signs swap deals with primary banks, which in turn trade with other local lenders.
혻혻 "This new trading system is expected to help ease recent market jitters in the foreign currency market hit by the global financial turbulence," Ahn Byung-chan, head of the central bank's international bureau, told reporters.
혻혻 The central bank will hold auctions on a weekly basis starting on Tuesday, it added.
혻 혻 "For the first bidding, about US$2 to 3 billion will be auctioned and the size of the dollar supply will be increased gradually, but it depends on the global market situation," Ahn added.
혻혻 South Korea's foreign exchange market has been suffering from a dollar shortage as banks and companies are scrambling to hoard the safer greenback on concerns of a financial crisis sparked by the collapse of investment bank Lehman Brothers Holdings Inc. A dollar shortage has pushed down the value of the won and local stocks over the past few weeks.
혻혻 "Local banks are having difficulties in borrowing overseas, but it is not true that they cannot raise funds at all," Ahn said. "They have already secured funds needed until the end of October and many of them have raised money needed until end-November."
The won has dropped roughly 30 percent against the U.S. dollar so far this year as overseas investors have continued to pull money out of local stocks, causing Korean financial institutions to suffer a dollar shortage.
혻혻 The central bank has pledged to continue providing U.S. dollars to the local swap market until it stabilizes.
혻 혻 The local currency closed at 1,334 won to the greenback on Friday, up 39 won or 2.9 percent from the previous day's close, as sentiment was buoyed by the BOK's move to supply dollars to more banks. A decision by Moody's Investors Service to retain its A2 "stable" outlook for South Korea's sovereign ratings also boosted investor attitudes.
혻혻 "The BOK's move is good news for the Korean money and foreign exchange markets. But the decision may not be strong enough to completely restore confidence in the market," said Jeon Seung-ji, a currency analyst at Samsung Futures Inc. "If the government unveils strong measures like state guarantees for inter-bank loans, weak sentiment is likely to ease."
South Korea's foreign exchange reserves, the world's sixth-largest, reached US$239.7 billion as of the end of September, down $3.53 billion from a month earlier and marking a decline for the sixth straight month.
혻혻 Foreign exchange authorities have unloaded some of their dollar holdings to fight inflation by propping up the sliding local currency.
혻혻 [email protected] |
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JFuller317
Joined: 10 Oct 2008
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| Posted: Fri Oct 17, 2008 12:52 am Post subject: |
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I guess what I'm not understanding is why exactly all these banks and investors need dollars so much. I understand that there is some debt that must be repaid in dollars, but is that it?
This part about rushing to get the "safer greenback" seems really foolish. They're willing to sell low and lose 30%-40% of their money's value because the dollar is somehow "safer?"
It just comes across as a bunch of people acting extremely irrationally. Sorry if I don't understand something that should be obvious. |
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ddeubel
Joined: 20 Jul 2005
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| Posted: Fri Oct 17, 2008 1:26 am Post subject: |
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There seems to be a lot of valuable perspective on this thread. Much appreciated. It is informed info. we need and not yelling and screaming.
So I have a bit of an off topic question to ask.
Today, I was talking to a Swiss friend. He is an international type and likes financial markets for the earning potential for the saavy. He advised that I just throw everything into the Chinese Yuan. Leave it there for a year or two and reap the benefits which will come when the Chinese finally enter the international banking system.
Any thoughts on this?
DD
http://eflclassroom.ning.com |
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Big Pun Lives
Joined: 12 Oct 2008
Location: Seoul, South Korea
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| Posted: Fri Oct 17, 2008 3:35 am Post subject: |
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| ddeubel wrote: |
There seems to be a lot of valuable perspective on this thread. Much appreciated. It is informed info. we need and not yelling and screaming.
So I have a bit of an off topic question to ask.
Today, I was talking to a Swiss friend. He is an international type and likes financial markets for the earning potential for the saavy. He advised that I just throw everything into the Chinese Yuan. Leave it there for a year or two and reap the benefits which will come when the Chinese finally enter the international banking system.
Any thoughts on this?
DD
http://eflclassroom.ning.com |
That would be VERY Risky...China's banking structure is non-transparent, corrupt, and going to be at risk once all of the FDI vanishes, the reason they have done ok thus far is the fair amount of reserves they have on hand, but they cannot avoid the global recession. China is a huge export economy, less demand for Chinese goods, equities, and capital investment means less demand for the Yuan ...not exactly a great place to park money in the next year.
Just my opinion, others may disagree - |
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Josquin
Joined: 10 Oct 2008
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| Posted: Fri Oct 17, 2008 7:12 am Post subject: |
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The dollar is safer because it can be used universally between banks and for importing and exporting--the won cannot.
http://wfhummel.net/dollarstandard.html
| Quote: |
| Today over half of all dollar notes in circulation are held outside the borders of the US. Almost half of US Treasury securities are owned by foreigners, mainly held as reserves by foreign central banks. The dollar is the main currency in international capital flows, as well as the currency of invoice for commodities and for many manufactured goods and services. All countries that trade directly with the US invoice both imports and exports in US dollars. |
http://wfhummel.net/dollarization.html
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| Where the purchasing power of the local currency has been volatile, as in Latin America and in the former Soviet Union, people often hold dollars as a store of value. In those cases the domestic currency is commonly used in small transactions, but the dollar is preferred in large transactions and in savings. |
So my understanding of this is that if they convert their won into dollars they can safely ignore won fluctuations indefinitely. There is absolutely no need for them to hold won because they can continue to do business in dollars. Nobody cares about the won outside of South Korea. But the dollar is good anywhere.
Hope this helps!
| JFuller317 wrote: |
I guess what I'm not understanding is why exactly all these banks and investors need dollars so much. I understand that there is some debt that must be repaid in dollars, but is that it?
This part about rushing to get the "safer greenback" seems really foolish. They're willing to sell low and lose 30%-40% of their money's value because the dollar is somehow "safer?"
It just comes across as a bunch of people acting extremely irrationally. Sorry if I don't understand something that should be obvious. |
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