Dollar Deposits Surge $6.3 Billion as Won Strengthens Into High 1,300s
Dollar deposits at South Korea’s five major commercial banks have surged as the won strengthened into the high 1,300s per dollar, with households and companies increasing dollar holdings amid expectations that the exchange rate could rebound.The combined balance of dollar deposits at KB Kookmin Bank
South Korean households and businesses have amassed $6.3 billion in additional dollar deposits as the country's currency, the won, has risen to near 1,300 per dollar. As of August 18, the combined dollar deposits across KB Kookmin Bank, Shinhan Bank, Hana Bank, Woori Bank, and NongHyup Bank reached $75.82 billion, a $6.34 billion increase from the end of July.
This surge follows the won's sharp strengthening against the dollar, with the exchange rate settling at 1,397.7 won on August 19, its lowest level since September last year. The recent decline in the exchange rate has had varying impacts on Korean investors with U.S. stocks. Some investors see the stronger won as a chance to buy dollars at a lower rate, potentially benefiting from further currency depreciation.
The Bank of Korea notes that overseas investment demand remains strong, irrespective of exchange-rate levels. The recent strengthening of the won is credited to increased dollar sales by major exporters like Samsung Electronics and SK hynix, as they convert dollars to won for tax payments and shareholder returns. Anticipations of a less aggressive U.S. Federal Reserve have also contributed to the dollar's decline, as U.S. inflation data has been lower than expected.
The dollar index has fallen to 99.46, while the yen nearing 160 per dollar has raised the possibility of Japanese intervention, limiting the dollar's upward potential. Economists predict that downward pressure on the dollar-won exchange rate will continue due to a stronger trade surplus driven by semiconductor exports and ongoing corporate currency conversions.
Analysts believe that the current exchange rate decline may encourage investors seeking stability in the domestic stock market to shift towards U.S. equities.
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