Koreans Snap up Dollars Despite Spiking Rate

Korean individuals and businesses bought trillions of won worth of U.S. dollars last month due to mounting concerns over the Korean economy.

According to the Bank of Korea on Tuesday, foreign-currency deposits held by Koreans increased by $2.4 billion as of late May to $65.6 billion.

Most or $2.2 billion was U.S. dollars. Normally, dollar deposits tend to decline when the greenback strengthens against the won as investors try to cash in on the difference, but not this time.

The intensifying U.S.-China trade war slowed Korean exports and shrank the economy here in the first quarter, which was compounded by the first current account deficit in seven years. That sent the won tumbling from above W1,120 to the dollar in early June, prompting investors to sell their dollar holdings to reap profits. Foreign-currency deposits duly fell from $63.6 billion in late January to $53.4 billion in late April.

But the situation changed in May. The won weakened to just over W1,200, but people still lined up to buy the greenback.

Kim Ja-young at the Bank of Korea said, "Individuals and businesses both expect the dollar to strengthen further." Individuals accounted for 21.6 percent of dollar deposits, which is the highest level on record.