Companies stockpile dollars amid soaring exchange rate…deposits up 21% in a month

Balances at five major banks increase 21% in one month

The corporate dollar deposit balances of the five major commercial banks — KB Kookmin Bank, Shinhan Bank, Hana Bank, Woori Bank and NongHyup Bank — were recorded as having increased by more than 20% compared with the previous month. As the won remains weak against the dollar and forecasts that the won-dollar exchange rate could exceed the 1,500-won level gain traction, analyses suggest companies and individuals are stockpiling dollars.

According to the financial sector on the 30th, as of the 27th the corporate dollar deposit balance at the five banks was approximately 53,744,000,000 dollars, up about 21% from the end of last month (44,325,000,000 dollars).

Dollar deposits are financial products in which won is converted into dollars and deposited, then returned in won when withdrawn or at maturity. If the won-dollar exchange rate is higher at maturity than at the time of deposit, it is possible to earn exchange gains.

Normally, when the won-dollar exchange rate rises, investors tend to realize gains and reduce dollar deposit balances, but this month deposit balances increased despite the rising exchange rate. It is interpreted that companies increasing investment in the United States and rising exchange rate uncertainty strengthened the tendency to hold more dollars on the expectation that dollar strength will persist.

Individuals have also shown a recent trend of accumulating dollar deposits. As of the 27th, individual-held dollar deposit balances stood at 12,253,000,000 dollars, a slight increase for four consecutive months since the end of August (11,618,000,000 dollars). The individual dollar deposit balance at one of the five banks exceeded 3,000,000,000 dollars, marking the highest level in 3 years and 10 months since January 2022.

The total dollar deposit balance, including individuals, companies and other public institutions, was 67,010,000,000 dollars as of the 27th, an 18% increase from the end of last month. This is the largest increase so far this year.

The won-dollar exchange rate has been on a high run, breaking through 1,470 won for the first time in seven months. As the rapid rise in the won-dollar exchange rate shows little sign of easing, the government and the National Pension Service discussed measures to stabilize the foreign exchange market on the 24th.

Oh Jeong-min, Hankyung.com reporter blooming@hankyung.com