US Dollar Selling Increases as Won's Value Falls
The Bank of Korea announced on March 18 that residents’ foreign currency deposits totaled US$68.51 billion at the end of February, down US$6.47 billion month on month, and their U.S. dollar deposits decreased by US$6.31 billion that month. The foreign currency deposits showed the steepest decline since March 2019 and decreased for the second consecutive month.
This is because individuals as well as enterprises sold the U.S. dollar in quantity with the won-dollar exchange rate rising last month. With COVID-19 spreading across the world, the value of the U.S. dollar as a safe asset is continuing to increase. The won-dollar exchange rate, which was 1,191.8 won per U.S. dollar at the end of January this year, jumped to 1,213.7 won per U.S. dollar at the end of the next month in the wake of the spread of the coronavirus.
Under the circumstances, a large number of enterprises and individuals sold the deposits for cash, causing the significant decline. Individuals’ U.S. dollar deposits, in particular, showed the largest decrement since the central bank’s records began.