Against the backdrop of the won's appreciation, foreign-currency deposits surged by approximately KRW 30 trillion in 5 months. The dollar reached a 2-year high, while the yen approached an 18-year high, directing individuals' and companies' investment appetite toward foreign-currency assets.
As the value of the South Korean won rose rapidly, dollar deposit balances at the 5 major commercial banks totaled $85.49 billion as of the 9th, an increase of $22.5 billion from the end of May. Dollar deposit balances have continued to rise for more than 6 months from their March low toward a year-to-date high. Total foreign-currency deposits have also accelerated in tandem, highlighting the move to build assets in dollars.
Yen deposit balances totaled ¥1.1841 trillion, up 34.6% from the end of May. Additional inflows since the start of this month have reached as much as ¥33.6 billion. The continued shift from yen-denominated assets to foreign-currency assets is supporting demand for foreign currencies, despite unstable conditions in the foreign-exchange market.
Expectations of a recovery in the value of the dollar and yen are behind the sharp increase in foreign-currency deposits. Analysts say continued dollar selling by export companies during the period of a weak won, together with strong exports led by semiconductors, has kept the USD/KRW exchange rate in the 1,300-won range and relatively supported the won's appreciation.
The continued yen carry trade is also cited as a factor pushing up the exchange rate. Depending on the pace of the Bank of Japan's monetary policy normalisation, the won's value against the yen could be readjusted, and short-term exchange-rate trends are likely to be particularly susceptible to external conditions. Policy trends at the Federal Reserve and the Bank of Japan, as well as the sustainability of global semiconductor demand, will be important variables going forward.