As the won-dollar exchange rate surpasses 1500 won, companies are increasingly stockpiling dollars. With the potential for further increases in the exchange rate, many businesses are delaying currency exchanges, leading to the highest level of dollar deposits in three years and five months.
According to the financial sector on June 14, the total balance of corporate dollar deposits at South Korea's five major banks (KB Kookmin, Shinhan, Hana, Woori, and NH Nonghyup) reached $54.371 billion as of June 11. This marks the largest amount since the end of January 2023, when it was $55.255 billion.
The growth rate is also significant. Corporate dollar deposits rose from $46.230 billion at the end of March to $49.028 billion at the end of April, and then to $50.713 billion at the end of May. In just 11 days this month, the deposits increased by $3.658 billion. In contrast, individual dollar deposits decreased by $139 million to $12.136 billion. Overall, dollar deposits grew from $62.989 billion at the end of May to $66.570 billion by June 11, an increase of $3.518 billion.
To stabilize the market, the government is encouraging companies to increase their dollar supply. The Ministry of Finance and the Ministry of Trade, Industry and Energy held a meeting on June 11 with major exporters, including Samsung Electronics, SK Hynix, and Hyundai-Kia, urging them to expedite the conversion of export proceeds and increase the inflow of overseas retained earnings into the domestic market. The Financial Services Commission and the Financial Supervisory Service also requested banks to refrain from aggressive marketing of dollar deposits.
However, as the exchange rate continues to rise, companies are opting to hold onto their dollars rather than release them into the market. There is growing demand for foreign currency liquidity in preparation for import payments and foreign debt repayments, and exporters are delaying the timing of dollar sales due to the potential for further increases in the exchange rate. The recent surge in dollar earnings from exports, particularly in semiconductors, has also contributed to the increase in dollar deposits.
This trend is influenced by high exchange rates and significant volatility. The average won-dollar exchange rate in June has reached 1523.3 won (based on weekly closing prices), the highest since February 1998 during the Asian financial crisis, when it was 1626.8 won. The daily fluctuation this month has also increased to 10.1 won, compared to 6.6 won in May and 8.9 won in April. As the exchange rate experiences large daily swings, the sentiment to hold dollars as a safe asset and liquidity source is becoming stronger.
Experts identify key variables that could shift the direction of the exchange rate, including the resolution of conflicts in the Middle East and the stabilization of foreign stock sell-offs. However, they predict that, in the short term, the exchange rate will continue to fluctuate within the mid-1500 won range. Park Sang-hyun, a researcher at iM Investment & Securities, stated, "We expect significant volatility to persist for the time being, and the exchange rate is likely to fluctuate around the 1500 won level depending on external factors. For a reduction in the rapid rise of the exchange rate, the resolution of high oil prices, which is a direct cause, must be addressed."
* This article has been translated by AI.
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