South Korea's resident foreign currency deposits posted their largest monthly decline on record in March, as a high exchange rate driven by the Iran war spurred profit-taking and companies converted holdings to won to pay corporate taxes at month-end.
According to the "March Resident Foreign Currency Deposit Trends" released by the Bank of Korea (BOK) on Tuesday, the balance of resident foreign currency deposits at foreign exchange banks stood at $102.17 billion as of the end of last month, down $15.37 billion from the previous month-end — the largest decline on record. The drop far exceeded the previous record of $11.73 billion registered in February 2023. The declining trend has continued for three consecutive months since January this year.
Resident foreign currency deposits refer to the combined domestic foreign currency deposits of Koreans and domestic companies, foreigners who have resided in Korea for more than six months, and foreign companies operating in Korea.
By currency, U.S. dollar deposits, which account for the largest share of resident foreign currency deposits, stood at $85.64 billion, down $10.36 billion from the previous month. This was also a record-high monthly decline.
The fallout from the Middle East war drove the won-dollar exchange rate sharply higher, increasing profit-taking, while corporate demand for won to settle payments and pay corporate taxes at the end of March also boosted currency conversion. "A decline in investor deposits at securities firms, as well as overseas investment outflows and current account payments, added to the widening drop," a BOK official said.
The euro deposit balance stood at $6.31 billion, down $3.28 billion from the previous month, in what was attributed to remittances of settlement payments to overseas parent companies. Yen deposits decreased by $1.49 billion to $7.82 billion.
By holder, corporate deposits came to $86.8 billion, down $13.43 billion from the previous month. Deposits held by individuals fell by $1.93 billion to $15.37 billion.
