Reading 19 EOC : Currency Management Q17

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CFA300

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Question (summarised): The overseas markets for Korean (KRW) export goods are slowing down and the US (USD) is experiencing growth in exports. How does this affect the KRW/USD exchange rate?
My answer: I associated the slowing down of the Korean exports with its goods being expensive to the foreigners (i.e. appreciation of the KRW), likewise the peak in US exports with US goods being cheap (ie $ depreciation). As a result the KRW/USD depreciates.
CFA answer: Based on the predicted export trends, the KRW is expected to depreciate and USD to appreciate. Overall KRW/USD appreciating.
Please help me understand this.
 
I view it as less demand for Korean goods results in less demand for KRW and a depreciating currency.
Greater demand for US goods results in greater demand for USD and so USD appreciates.
 
THESONG: Your explanation makes sense, thanks.
But if i recall well, the appreciation of one’s currency drives exports down (bcz your goods are expensive to foreigners).
So to me here it looks like the “what came first the chicken or the egg” situation.
 
It’s circular logic but rising exports should led to an appreciating currency (eventually)
 
Thanks Galli, will look at it (and remember it) from that angle.
 
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