Amid the rising value of the U.S. dollar and the subsequent selling off to capitalize on profits, residents’ foreign currency deposits decreased by nearly $100 billion last month, marking a continuous decline for the second month in a row. Consequently, the foreign currency deposit balance shrank to the US$800 billion range for the first time in a year. In contrast, due to the demand arising from the Super Yen Effect, yen deposits showcased an upward trend.
According to the Resident Foreign Currency Deposit Trends for September 2023 report released by the Bank of Korea (BOK) on Oct. 24, the balance of residents’ foreign currency deposits stood at US$896.9 billion at the end of September, down by US$9.41 billion compared to the end of August. This represents the largest decline in seven months since last February, which saw a decrease of US$11.73 billion. It’s also noteworthy that the balance of foreign currency deposits dropped to the US$800 billion range for the first time since September of the previous year.
Residents’ foreign currency deposits had continuously decreased this year until they turned to an increasing trend starting from May. By the end of July, due to temporary overseas financing by companies among other reasons, the foreign currency deposit balance exceeded US$1.00 trillion.
However, from August, under the influence of a strong dollar, the balance of foreign currency deposits transitioned to a decline after four months of growth. A representative from the BOK explained, “Residents’ foreign currency deposits decreased due to factors such as corporate spot foreign exchange sales and payment of import settlements.”
By currency, U.S. dollar deposits decreased by US$9.19 billion within a month. The BOK cited several reasons, including spot sales by some companies, payment of import settlements, and overseas money transfers in preparation for the Chuseok holiday. Euro-denominated deposits also decreased by US$140 million over the same period.
In contrast, yen-denominated deposit balances increased by US$100 million compared to the end of August. By the end of September, the balance of yen deposits reached its all-time high at US$8.38 billion. This surge was a result of an influx of demand to invest excess cash in yen amid historically low yen values. The reason behind this trend is that the recent exchange rate of the yen against the Korean won has recorded its lowest since June 2015, hovering around the early 900 won range.