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🇰🇷 South Korea /Economy & Trade

As Won-Dollar Rate Tops 1500, Firms Sell $8.9 Billion in Dollars

From Hankyoreh · (5h ago) Korean Critical tone

Translated from Korean, summarized and contextualized by DistantNews.

TLDR

  • South Korean exporters sold $8.9 billion worth of dollars in March as the won-dollar exchange rate surged past 1500 won.
  • Foreign currency deposits held by residents decreased by a record $15.37 billion in March, primarily due to a significant reduction in corporate dollar deposits.
  • The decline in corporate dollar holdings is attributed to increased demand for Korean won for domestic settlements, coupled with factors like reduced investor deposits and overseas investments.

The Hankyoreh reports a dramatic outflow of foreign currency from South Korea in March, driven by a sharp depreciation of the Korean won against the US dollar. As the exchange rate breached the 1500 won per dollar mark, exporting companies offloaded a staggering $8.9 billion from their dollar holdings to meet domestic payment obligations and hedge against further currency fluctuations.

Exporting companies sold $8.9 billion worth of dollars as the won-dollar exchange rate surged past 1500 won in March.

— Bank of KoreaThe article details the impact of the exchange rate surge on corporate dollar holdings.

This significant sell-off contributed to a record-breaking $15.37 billion decrease in total resident foreign currency deposits by the end of March. The bulk of this reduction came from corporate dollar accounts, which shrank by $10.36 billion. The Bank of Korea attributed this trend to a confluence of factors: heightened demand for Korean won for domestic transactions, a decrease in securities firms' investor deposits, and increased overseas investment expenditures by corporations.

Resident foreign currency deposits decreased by $15.37 billion from the end of February to the end of March, the largest decrease ever.

— Bank of KoreaThe article reports on the overall decrease in foreign currency deposits.

From a South Korean economic perspective, this event highlights the vulnerability of the national economy to external currency shocks. While a weaker won can theoretically boost exports, the rapid and significant depreciation experienced in March likely created considerable uncertainty and operational challenges for businesses. The record outflow of foreign currency underscores the immediate pressure on companies to manage their dollar liquidity. This situation is closely watched by policymakers and businesses alike, as it directly impacts import costs, inflation, and the overall stability of the financial market. The reliance on foreign currency reserves and the reactive measures taken by corporations signal a delicate balancing act in navigating global economic headwinds.

Corporate dollar deposits decreased by $8.91 billion.

— Bank of KoreaThe article specifies the reduction in corporate dollar holdings.
DistantNews Editorial

Originally published by Hankyoreh in Korean. Translated, summarized, and contextualized by our editorial team with added local perspective. Read our editorial standards.

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