Korea’s Resident Foreign-Currency Deposits Post Record $15.37B Drop as Won Slides Into 1,500s

Resident foreign-currency deposits in South Korea posted their biggest monthly drop on record last month as the won-dollar exchange rate surged and moved in the 1,500-won range. The Bank of Korea said increased demand for currency exchange and outflows tied to overseas investment both weighed on balances.

According to the central bank’s “Trends in Resident Foreign-Currency Deposits” released on April 22, resident FX deposits at foreign-exchange banks totaled $102.17 billion at the end of March, down $15.37 billion from a month earlier.

Resident FX deposits refer to foreign-currency deposits held domestically by Korean nationals and companies, foreigners who have lived in South Korea for at least six months, and foreign companies operating in the country. The balance rose in November last year (+$1.7 billion) and December (+$15.9 billion), then fell in January (-$1.4 billion) and February (-$490 million).

By currency, dollar deposits totaled $85.64 billion, down $10.36 billion. The central bank cited stronger corporate demand for won and larger currency conversions as the exchange rate rose to 1,530.1 won per dollar at the end of March from 1,439.7 at the end of February. It also pointed to declines in securities firms’ client deposits, overseas investment execution and payments for current transactions.

Euro deposits fell $3.28 billion to $6.31 billion, reflecting settlement remittances to overseas parent companies. Yen deposits declined $1.49 billion to $7.82 billion due to securities firms’ client deposits and current-transaction payments.

By holder, corporate deposits dropped $13.43 billion to $86.8 billion, while individual deposits fell $1.93 billion to $15.37 billion.

By bank type, FX deposits at domestic banks decreased $11.36 billion to $87.24 billion. Deposits at local branches of foreign banks fell $4.0 billion to $14.93 billion.