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Wagering on weak won in long term, savers shift to dollar deposits, insurance products

Published: 27 Nov. 2025, 18:57 Updated: 28 Nov. 2025, 08:02

An employee organizes U.S. dollar bills at Hana Bank’s Anticounterfeit Countermeasures Center in Jung District, central Seoul, on Nov. 26. [NEWS1]

As the won lingers at its weakest levels in years, Korean savers are shifting billions of won into dollar deposits and insurance products, wagering that the currency slide will not reverse anytime soon.

A resident of western Seoul's Mapo District surnamed Lee is one of them. Earlier this month, Lee converted 50 million won ($34,200) from a retirement payout into dollars to lock in a dollar savings product that offered an interest rate in the mid–3 percent range. Lee also deposited dollars that had been set aside for occasional U.S. stock investments.

“The situation isn’t as dangerous as during the foreign exchange crisis,” Lee said, “but I think the won will keep weakening against the dollar for a while, so I am adjusting my portfolio as a hedge.”

Lee’s decision reflects a broader shift. Deposits in dollar accounts at the country’s five major banks — KB Kookmin, Shinhan, Hana, Woori and NH NongHyup — climbed to $63.18 billion as of Monday, according to financial industry data from Wednesday. That figure is up from $58.66 billion at the end of October, an increase of roughly 6.66 trillion won in less than a month.

Dollar deposits let customers convert won into dollars, hold them for a set period and switch them back at maturity. Savers earn regular deposit interest but can also benefit from exchange gains when the won weakens. Many investors expect the won to stay under pressure, and dollar accounts are emerging as a straightforward way to hedge against that risk.

The interest-rate gap

A rate gap between Korea and the United States that has persisted for more than two years has also bolstered demand. The U.S. Federal Reserve cut rates twice this year, but the upper bound of the federal funds rate still stands about 1.5 percentage points above the Bank of Korea’s benchmark. Dollar deposit rates reflect U.S. rates, giving savers a clear advantage.

Six-month time-deposit rates at Korea's major banks ranged from 2.81 to 3.1 percent for won deposits on Thursday, while foreign-currency deposits offered between 3.08 and 3.43 percent.

“Banks raised foreign-currency deposit rates by around 0.1 percentage points to keep dollar deposits from flowing out as customers tried to lock in exchange gains," a banking source said.

A boom in dollar insurance

A currency exchange booth in Myeong-dong, central Seoul, displays rates including the won-dollar exchange rate on Nov. 26. [NEWS1]

Demand is also surging for dollar-denominated insurance products, which collect premiums and pay benefits in dollars. Sales at the five major banks reached 1.55 trillion won in cumulative terms as of Nov. 21, already exceeding last year’s full-year total of about 964.1 billion won. Average monthly sales have reached 142 billion won, putting the market on track to surpass 1.7 trillion won this year.

The products span whole-life, disease and annuity insurance. Some offer tax exemptions on interest income if customers keep them for more than 10 years.

But dollar insurance products come with risks. If the dollar strengthens further by the time benefits are paid, policyholders could face lost exchange rate gains. Most policies run 10 to 20 years, a long stretch in which currency swings grow harder to predict.

Customers who canceled foreign-currency insurance policies at the end of last year recovered an average of just 88.9 percent of the total premiums they had paid, according to the Financial Supervisory Service (FSS).

“Dollar insurance offers no option other than canceling the policy even when exchange-rate swings widen,” an FSS official said, adding, “and because [people who cancel] may not get back 100 percent of what they paid if they cancel, they need to approach it cautiously as an investment.”

Feedback loop concerns

Economists warn that the shift toward dollar-based financial products could trap more dollars inside banks and insurance firms rather than circulating through the foreign exchange market, potentially reinforcing the won’s weakness. Rising demand for dollars could push the won lower, while long-term products keep those dollars locked away.

“Demand for dollars can push the won down even more,” said Kim Jung-sik, an emeritus professor of economics at Yonsei University.

“The won is more volatile than other currencies, so people need to weigh the risks carefully," he added.

This article was originally written in Korean and translated by a bilingual reporter with the help of generative AI tools. It was then edited by a native English-speaking editor. All AI-assisted translations are reviewed and refined by our newsroom.
BY KIM SEON-MI [[email protected]]