Safer assets sought as worries start to mountA 70-year-old women visited her bank in Gangnam, southern Seoul Friday to convert some Korean won into dollars.
“All my friends are doing it,” the woman, who didn’t want her name printed, said. “They’re changing whatever savings that they have into U.S. dollars because under this administration, the economy seems to be crashing.
“Recent tensions with Japan are clearly making the economy more unstable.”
Many Koreans are searching for safer assets including U.S. dollars, gold and bonds.
According to the Bank of Korea Monday, foreign currency deposits in Korea last month increased nearly $4.8 billion to reach $70.4 billion, a 7.2 percent increase from the previous month.
Those are deposits owned by Koreans or foreigners who have lived in Korea for more than six months.
Dollar deposits, which account for 85 percent of the foreign currency deposits, saw the biggest increase. Last month, dollar deposits increased nearly $4.3 billion, or 7.6 percent compared to the previous month, to reach $59.9 billion. Japanese yen increased $290 million over the previous month, or 7.5 percent, to reach $4.16 billion.
In contrast, Chinese yuan deposits declined by $90 million, or 6.3 percent, to reach $1.35 billion.
The central bank said the increase in foreign currency deposits was largely triggered by the appreciation of the Korean won against the U.S. dollar, which gave many the ability to purchase additional greenbacks.
The won, which was traded at 1,090.9 won against the U.S. greenback at the end of May, had appreciated to 1,154.7 won at the end of June.
A survey conducted by Samsung Securities last month showed already rising concerns about the economy and the need to protect assets.
According to the survey, which was conducted on 260 clients with more than 100 million won ($84,756)in deposits between June 11 and June 20, some 64.1 percent were willing to increase their investments in safer assets in the second half of this year due to growing uncertainties.
The brokerage firm said that was a 10 percentage point increase compared to the same survey conducted at the beginning of the year.
While more than 40 percent were willing to invest in foreign products, 58.6 percent showed particular interest in dollar investments, up from 55.3 percent at the beginning of this year.
“Many seem to be reacting to the deepening uncertainties and they are showing a preference for U.S. dollar-based investments,” said Yoo Seum-min, a Samsung Securities researcher.
The survey was conducted before Japan announced retaliatory actions against Korea by limiting the exports of key materials needed to make semiconductors and displays.
This means the flight to safer assets could deepen.
Although the won has recently appreciated after reaching close to 1,200 won, when compared to the beginning of this year, its value is down 5 percent.
The won on Monday closed at 1,179.3 won against the greenback, 10 won higher than on Friday’s.
BY LEE HO-JEONG [firstname.lastname@example.org]