Seoul: SK hynix Inc. is set to significantly impact South Korea's foreign exchange market with a substantial inflow of U.S. dollars. This development follows the company's successful raising of approximately 40 trillion won (US$26.5 billion) through an American depositary receipt (ADR) offering on Nasdaq, as reported by industry sources.
According to Yonhap News Agency, the proceeds from this U.S. listing are scheduled to be transferred to SK hynix on Monday. The company intends to allocate the majority of these funds for domestic investments, such as the Yongin semiconductor cluster. Consequently, a significant portion of the dollar-denominated proceeds is expected to be converted into the won, thereby increasing the supply of dollars in the local foreign exchange market.
This anticipated dollar inflow is expected to alleviate the pressure on the Korean won, which has been weak against the dollar. The weakness is attributed to the broad strength of the dollar and the rising overseas investments by Korean companies, as noted by the industry sources.
An official from SK hynix mentioned that the exact size and timing of the foreign exchange transactions are yet to be determined. Market experts have compared the expected inflow to the dollar liquidity supplied under the $60 billion currency swap deal between the Bank of Korea and the U.S. Federal Reserve during the 2020 COVID-19 market turmoil. Although the swap line had a limit of $60 billion, actual dollar drawings amounted to $19.87 billion.