Why the Era of Trading Foreign Capital Solely by FX Rates Is Over
Discover why the old rule of using exchange rates to track foreign inflows into KOSPI is broken, and what really drives global capital today. When a navigator relies on an outdated map instead of a compass in rough seas, the ship will never reach its destination. Are we truly keeping our eyes on the right indicators in today’s transformed financial ocean? Core Insights 1. The Flaw in Currency Quotations and the Nature of Dollar Hegemony Humans are trapped in the prison of the language they use. The term "Won-Dollar exchange rate," which we routinely use, already harbors numerous cognitive biases and errors. To simplify the complexity of financial markets, we must first correct our perspective on notation. The moment we shift our view to the "Dollar-Won" exchange rate—expressing the value of the won relative to the dollar—the lens through which we view the asset market becomes dramatically transparent. A rise in the exchange rate signifies the strength of the reser...