"Exchange Rates Plunge, Now's the Opportunity" ... After Everyone Rushes In, 'This' Hits a 4-Year, 10-Month High

Picking Up Dollars and Yen as Exchange Rates Fall
Tapping Overdraft Lines to Buy the Dip as Stocks Plunge
Gold Bar Sales Also Rise Amid Geopolitical Risks

As the won-dollar and won-yen exchange rates have both fallen, foreign currency deposits at banks are rising sharply. The increase appears to reflect demand from people looking to buy dollars and yen while exchange rates are lower, as well as demand for foreign currency exchange ahead of trips to Japan. Meanwhile, as stock market volatility has increased, credit-based borrowing to buy stocks at lower prices is rising again. People are also seeking to acquire physical gold amid expectations of rising international gold prices and geopolitical uncertainty, accelerating the movement of funds in the market.

ATMs operated by commercial banks are installed along a street in downtown Seoul.

Dollar Deposits Up 34% From This Year's Low... Individual Balances Hit 4-Year, 10-Month High

According to the banking sector on October 18, individual dollar deposits at the five major banks (KB Kookmin, Shinhan, Hana, Woori, and NH Nonghyup) totaled $14.23 billion as of October 15. This was the largest balance in four years and 10 months, since $14.65 billion in December 2021.

On October 16, the won-dollar exchange rate fell as low as 1,328.9 won during intraday trading, its lowest level in two years since October 2, 2024. This appears to have prompted a surge in individual purchases of foreign currency by people seeking exchange-rate gains and investments in overseas assets.

Total dollar deposits held by individuals and businesses stood at $78.78 billion. Although this was down from $84 billion at the end of September, it was up 34.1% from $58.76 billion at the end of March, when the balance was at its lowest this year.

The divergence between the trends in total deposits and individual deposits appears to be largely due to a decline in corporate dollar deposits. Corporate dollar deposits stood at $64.55 billion, down $5.35 billion, or 7.7%, from $69.9 billion at the end of September.

A commercial bank official said the increase in individual dollar deposits "appears to reflect the decline in the exchange rate and a decrease in investment in U.S. stocks." Regarding the decline in corporate deposits, the official said, "Companies appear to be using existing foreign currency funds to settle trade payments or converting them into won to manage domestic expenses such as corporate taxes."

Won-Yen Exchange Rate at Lowest Since 2008; Yen Deposits Also Hit 2-Year High

Yen deposits also increased. As of October 15, yen deposits at the five major banks totaled 1.14627 trillion yen, the highest level since 1.15422 trillion yen in October 2024.

Individual yen deposits totaled 265.62 billion yen, up 11.6 billion yen, or 4.6%, from 254.02 billion yen at the end of September. This was the highest level since 271.5 billion yen in November 2024. Corporate yen deposits, meanwhile, stood at 880.64 billion yen, down 9.6 billion yen, or 1.1%, from 890.24 billion yen at the end of September.

The won-yen exchange rate fell to 839.9 won during intraday trading on October 12. This was its lowest level since it reached 833.4 won on January 2, 2008. The increase in deposits is believed to have been driven by individuals exchanging currency when the yen was weak or investing in Japanese stocks.

A commercial bank official said, "We believe the increase in foreign currency deposits reflects growing interest, particularly among individual customers, in foreign exchange investments and Japanese stocks." The official added, "An increase in demand from people looking to exchange yen in advance of trips to Japan is also one contributing factor."

Credit Loans Rise for First Time in Three Months as Stock Prices Fall

As stock market volatility has increased, demand for so-called "debt-financed investing," or borrowing to buy stocks, appears to be rising again. Individual credit loans at the five major banks totaled KRW 109.7121 trillion as of October 15, up KRW 1.4818 trillion, or 1.4%, from KRW 108.2303 trillion at the end of September. Total credit loans returned to growth for the first time in three months since July.

The increase in overdraft account balances was particularly pronounced. As of October 15, these balances totaled KRW 44.4546 trillion, up KRW 1.4712 trillion, or 3.4%, from KRW 42.9834 trillion at the end of September. This was the largest balance since KRW 44.7699 trillion in August 2022.

Banks believe this partly reflects demand for funds from investors who see falling stock prices as a buying opportunity. A bank official said, "Since the start of October, some demand for funds appears to have come from investors who view the decline in stock prices as an opportunity to buy at the bottom." Another official, however, said, "It may also be because people are facing higher expenses, such as living costs, while funds lost in the stock market remain tied up at securities firms."

KRW 43.03 Billion in Gold Bars Sold in First Half of Month; Gold Banking Balances Decline

Demand for physical gold also continued. Gold bar sales at the five major banks totaled KRW 43.03 billion from October 1 to 15, equivalent to 1.5 times the KRW 29.08 billion sold during all of September. This was the highest monthly sales figure since April, when sales reached KRW 49.01 billion.

A commercial bank official said, "Amid ongoing global geopolitical uncertainty, demand for asset diversification and expectations of rising international gold prices have combined to heighten customer interest."

A customer visiting the Jongno Main Branch of the Korea Gold Exchange in Jongno-gu, Seoul, is inquiring about purchasing a gold bar.

However, the balance of gold banking accounts, which allow customers to invest in gold through an account, has continued to decline. The gold banking balances at KB Kookmin, Shinhan, and Woori Bank totaled KRW 16.356 trillion as of October 15, down KRW 358 billion, or 2.1%, from KRW 16.714 trillion at the end of September. Gold banking balances have declined steadily since reaching a peak of KRW 24.434 trillion at the end of January this year. Some observers say this points not to a full recovery in sentiment toward gold investment, but rather to a pronounced preference among a small number of investors for physical assets.

This content was produced with the assistance of AI translation services.