Yoon Ja-young is in charge of articles translated by a generative AI system and edited by The Korea Times. She is interested in improving the newspaper through AI.
Koreans boost dollar savings
By Yoon Ja-young
With the U.S. expected to raise its key interest rate next month, Koreans are boosting their dollar savings, expecting to gain when the U.S. currency rises after the hike.
Data from local banks show that savings in U.S. dollars increased by about $1 billion during the past month.
The balance of dollar savings by individuals at KB Kookmin Bank, Woori Bank, Industrial Bank of Korea and NH totaled $4.2 billion as of October, up 28 percent from the end of last year.
Foreign exchange savings by customers at KEB Hana Bank and Shinhan Bank also expanded 23.5 percent to $4.4 billion during the same period.
The U.S. dollar accounts for about 80 percent of foreign exchange savings at these two banks.
These accounts pay only minimum interest, now below 1 percent. However, the investors are not interested in interest ― they are betting that the dollar will appreciate.
Global funds are also betting on dollar. The value of the dollar against the euro has risen to its highest level in seven months. Compared with the currencies of the United States’ major trading partners, the dollar has climbed to a 12-year high.
Saving in U.S. dollars can therefore be a good investment.
For instance, people who have converted 116 million won into $100,000 and saved it in dollar accounts can expect to gain 9 million won if the greenback rises to 1,250 won per dollar, as some analysts expect. The dollar is now trading at around 1,160 won.
Another benefit is that no tax is levied on gains from foreign currency exchanges.
Securities companies are also launching dollar investment products, such as a dollar repurchase agreement (RP), overseas equity trade fund (ETF), or exchange trade note (ETN) investing in dollar indexes.
However, some analysts advise investors to be more prudent because the dollar is not guaranteed to appreciate after the U.S raises its key rate.
“With the U.S. key rate hike imminent, many expect the dollar to strengthen,” said Yuanta Securities strategy director Kim Seung-hyun.
“But past experience shows that the key rate is not the only factor determining the direction of the foreign exchange rate.”
He pointed out that the greenback was already high.
“When considering the gap between the global growth rate and the U.S. growth rate, the dollar is more likely to turn weak next year,” he said.