More Koreans buy dollars as won strengthens against greenback
Summary
The won-dollar exchange rate fell below 1,400 won in mid-August for the first time in nearly a year, and more Koreans began buying U.S. dollars to benefit from the stronger won. The rush has lifted foreign currency deposits and boosted demand for Toss Bank’s Foreign Currency Piggy Bank. The won closed at 1,372.5 per dollar on Friday, extending its streak below 1,400 won since Aug. 19.
Key Facts
- According to the Bank of Korea, foreign currency deposits at Korean banks stood at $128.34 billion at the end of July, up $15.01 billion from a month earlier.
- Dollar deposits accounted for most of those funds, reaching $108.92 billion.
- Toss Bank’s average number of daily deposits for its Foreign Currency Piggy Bank reached 16,248 over the past week, nearly 10 times the 1,656 recorded at launch four weeks earlier.
An employee arranges U.S. dollar and Japanese yen banknotes at Hana Bank's counterfeit detection center in central Seoul, July 2. Yonhap
When the won-dollar exchange rate fell below the 1,400-won mark in mid-August for the first time in nearly a year, Park, an office worker in her 30s, began looking for ways to buy U.S. dollars and take advantage of the stronger won.
“I came across some social media posts recommending Toss Bank’s foreign currency account as a way to make money from exchange rate movements, so I opened one,” she said. “There’s no exchange fee, and the interface is easy to use, which is especially nice for a beginner like me.”
Park is also considering dollar repurchase agreements (RPs) after watching a friend put spare cash into them whenever he had some left over. RPs are short-term investments where investors effectively lend money to a financial institution in exchange for securities that are repurchased at an agreed price and date, allowing them to earn interest on their dollars.
As the exchange rate falls, more Koreans are looking to lock in dollars for future use.
The won’s recent gains have been fueled in part by a jump in dollar supply in Korea’s foreign exchange market, as exporters have started selling more of their dollar earnings. The Bank of Korea (BOK) has also raised interest rates twice in succession, narrowing the gap with U.S. rates, while expectations for further Federal Reserve hikes have faded.
In the Seoul foreign exchange market, Friday, the won closed at 1,372.5 per dollar, extending its streak below the 1,400-won mark since Aug. 19.
The rush to buy dollars while the exchange rate is favorable has also pushed up foreign currency deposits held by Korean residents and companies.
According to the BOK, such deposits at the country’s banks stood at $128.34 billion at the end of July, up $15.01 billion from a month earlier — the biggest monthly increase in seven months. Dollar deposits made up the bulk, reaching $108.92 billion.
Toss Bank, one of Korea’s major internet-only lenders, has seen a similar surge in demand for its “Foreign Currency Piggy Bank,” which allows customers to build up dollar holdings in small amounts.
The average number of daily deposits over the past week reached 16,248, nearly 10 times the 1,656 recorded when the product launched four weeks earlier.
The product lets customers convert between 10,000 won and 3 million won into dollars each day, with no separate exchange process. Toss Bank charges no exchange fees when customers buy dollars or convert them back into won.
“Banking products typically get the most attention immediately after launch, but this one has continued to attract more users over time,” a Toss Bank official said.
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