Strong dollar brings opportunities for banks, deals blow to overseas students

U.S banknotes are stacked up for inspection at a counter-forgery center at Hana Bank in Seoul, Wednesday. Yonhap

By Yi Whan-woo

The strongest U.S. dollar against the Korean won in nearly 14 years is bringing business opportunities for commercial banks, which are rushing to introduce lucrative dollar-denominated products for customers.

The situation faced by lenders is in contrast to Korean students studying abroad, who are struggling to pay tuition and other expenses, which are higher than ever due to the unfavorable exchange rate.

The dollar is up more than 10 percent in 2022 compared to other top currencies ― near its highest level in two decades ― and the situation has not gone unnoticed in Korea.

After starting in the upper 1,180-won range on the first trading day this year, the won-dollar exchange rate kept exceeding psychological thresholds, topping the 1,340-won level this week.

While the won-dollar exchange rate fell slightly to close at 1,342.1 won on Wednesday, it closed the day before at a near 14-year high of 1,345.5 won.

Under these circumstances, major banks have come up with new dollar-denominated deposit accounts that offer attractive interest rates and other benefits.

KB Kookmin Bank, the nation's largest private lender, is offering a 90-percent cut in exchange fees for corporate customers who open new foreign currency deposit accounts.

NH NongHyup Bank is offering 1.91-percent annual interest for new customers who deposit $1 million or more.

For those who open new dollar-denominated deposit accounts by Friday, Standard Chartered Bank Korea is offering a special interest rate of up to 3.5 percent.

“We see a noticeable increase in the number of customers who are interested in dollar-denominated products,” said Bae Soon-chang, head of SC Korea's savings products department.

Accordingly, foreign currency-denominated deposits totaled $90.38 billion in July, up $3.32 from a month earlier, according to data from the Bank of Korea (BOK).

The July figure also marked a sharp turnaround from June, when foreign currency deposits retreated by $2.11 billion from the previous month.

The corresponding account holders were Korean citizens and companies, foreign residents staying here for more than six months as well as foreign firms.

During the cited period, dollar-denominated deposits increased by $2.86 billion to $76.47 billion.

Euro-denominated deposits also rose by $570 million to $5.2 billion, according to the data.

But a strong dollar means soaring costs of living for Korean national students abroad who rely on money transfers from home to finance their studies.

For instance, a 15-percent increase in the won-dollar exchange rate costs an extra 10 million won compared to past when transferring $50,000.

“I am just so sorry for my parents. I am studying abroad at the wrong time,” said a Korean student studying at a college in New York.

A housewife whose daughter is on an exchange student program in California said the soaring won-dollar rate is frightening.

“Many Koreans who were studying abroad during the 1997-1998 Asian financial crisis gave up their studies and came back to Korea,” she said. “I hope that the situation doesn't get that bad.”