Dollar deposits in Korea jump to record on flight to safety and yields

An employee sorts out dollars at Hana Bank's Counterfeit Notes Response Center in Jung District, central Seoul, on Dec. 5. [YONHAP]

Dollar deposits jumped to a record high in November as savers fled market uncertainties for a safe haven currency.

Foreign currency deposits overall held by residents in November rose $9.74 billion from a month earlier to a record $107.39 billion, the Bank of Korea said in a statement on Wednesday.

The increased was unprecedented.

Dollar deposits jumped to a record high of $93.52 billion, up $8.72 billion, in the same period.

“Payment deposits for corporations importing and exporting and demand to secure liquidity of foreign exchange contributed to pushing up dollar deposits,” said a spokesperson for the Bank of Korea.

The deposits include holdings by Koreans, domestic corporations, foreigners that have lived in Korea for at least six months and overseas corporations operating businesses in Korea.

Euro deposits grew $400 million, Japanese yen $370 million and Chinese yuan $320 million in the same period.

Euro deposits jumped as some brokerage firms collected funds for the trading of derivative products, the bank said.

Foreign deposits held by individuals totaled $14.57 billion, up $300 million, while those of corporations stood at $92.8 billion, up $9.44 billion.

The won has been volatile this year as the Federal Reserve’s hawkish monetary policy attracted investors and savers to dollars.

Korea’s foreign reserves in November were $416.10 billion compared to $463.91 billion in the same month a year earlier.

The won hit 1,444.20 won to the dollar on Oct. 25 and is now trading below 1,300.

Bank of Korea Gov. Rhee Chang-yong noted Tuesday that the won fell exceptionally in September and October as the Fed’s rate increase was more rapid than the market had expected, and due to the relatively low base interest rates in other countries, like Japan and China.

“Risks have reduced, but there are still uncertainties,” said the central banker.

BY JIN MIN-JI [jin.minji@joongang.co.kr]