Decline in Domestic Foreign Currency Deposits for the First Time in Four Months: August Data Revealed

Decline in Domestic Foreign Currency Deposits Signals Economic Concerns

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In a concerning development for the economy, domestic foreign currency deposits witnessed a decline of $5.9 billion in August, marking the first downturn in four months. According to the ‘Residential Foreign Currency Deposit Trends in August 2023’ report released by the Bank of Korea on the 22nd, resident foreign currency deposits in foreign exchange banks at the end of August plummeted to $99.1 billion (approximately KRW 132.4 trillion), a significant drop compared to July’s figures.

Resident foreign currency deposits encompass the domestic foreign currency holdings of citizens, companies, long-term residents, and foreign entities operating within Korea.

This decline comes after a period of recovery, with resident foreign currency deposit balances showing positive growth from May through July. However, August’s downturn has dampened this upward trajectory, raising concerns about the underlying factors influencing the foreign currency deposit trend.

The Bank of Korea attributes this decrease in resident foreign currency deposit balances to two major factors – import charges incurred by domestic companies and reduced foreign investments. These factors have collectively contributed to the shrinkage in deposits held by residents.

• US dollar deposits registered at $83.04 billion, declining by $8.38 billion from July.
• Yen deposits also saw a drop of $840 million, landing at $8.28 billion.
• Euro deposits experienced a decrease of $530 million, amounting to $5.23 billion.
• Yuan deposits witnessed a decline of $130 million, totaling $1.24 billion.

Regarding the dip in dollar deposits, the Bank of Korea emphasizes that import payments, foreign investments by select companies, and reduced deposits from investors in securities firms have contributed to the overall decrease.

The diminished holdings of euro and yen deposits, on the other hand, can be attributed to the impact of import charges in addition to reduced conversions due to the relative strength of the US dollar.

Breaking it down by transaction entity, corporate deposit balances recorded a decrease of $5.24 billion from July, amounting to $84.44 billion. Personal deposit balances also contracted by $660 million during August, reaching $14.66 billion.

These latest figures raise concerns about the economic outlook and the potential consequences on businesses and individuals alike. As the global financial landscape remains volatile, stakeholders will closely monitor future trends in foreign currency deposits to gauge the underlying health of their economy.

Reporter: Cho Seung-ri

[비즈니스포스트] In August, domestic foreign currency deposits fell by $5.9 billion, turning into a decline for the first time in four months.

According to ‘Residential Foreign Currency Deposit Trends in August 2023’ published by the Bank of Korea on the 22nd, resident foreign currency deposits in foreign exchange banks at the end of August amounted to USD 99.1 billion (about KRW 132.4 trillion), a decrease of USD 5.9 billion compared to July.

▲ In August, domestic foreign currency deposits fell by $5.9 billion to $99.1 billion, marking the first decline in four months. <연합뉴스>

Resident foreign currency deposits refer to domestic foreign currency deposits of domestic citizens, domestic companies, foreigners who have lived in Korea for more than six months, and foreign companies operating in Korea.

Residents’ foreign currency deposit balances showed a downward trend until April this year, but rebounded in May and showed an increasing trend until July, before turning back to a downward trend in August.

The Bank of Korea explained that residents’ foreign currency deposit balances have decreased due to domestic companies’ import charges and foreign investments.

By currency, US dollar deposits were recorded at $83.04 billion, down $8.38 billion from July. Yen deposits also fell by $840 million to $8.28 billion.

Euro deposits were recorded at $5.23 billion, down $530 million from July. Yuan deposits also fell by $130 million to $1.24 billion.

The Bank of Korea explained, “Dollar deposits have decreased due to import payments, foreign investment by some companies, and a decrease in deposits by investors in securities companies.”

He added, “Euro and Yen deposits decreased due to the influence of import charges and a reduction in conversion due to the strength of the US dollar.”

By transaction entity, the corporate deposit balance in August was calculated to be $84.44 billion, a decrease of $5.24 billion from July. Personal deposit balance in August also decreased by $660 million compared to July, reaching $14.66 billion. Reporter Cho Seung-ri

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