South Korea’s won has staged a dramatic recovery against the U.S. dollar, but instead of rushing to convert their dollar holdings, Korean companies are building up their foreign-currency deposits to record levels.
Dollar deposits at five major South Korean banks — KB Kookmin, Shinhan, Hana, Woori and NH NongHyup — reached approximately $76.98 billion as of Sept. 3, the highest level since the banks began compiling comparable data in May 2021, according to financial industry data reported by Yonhap and The Korea Herald.
The surge comes as the Korean won has strengthened considerably. The won-dollar exchange rate fell to around 1,345 won per U.S. dollar on Sept. 4, its strongest level since October 2024. That represents a gain of roughly 254 won for the won from its July 1 low of 1,599.2 won per dollar, according to Yonhap’s latest report.
But the strengthening currency has produced an unusual market reaction: Korean companies are holding on to more dollars rather than immediately converting their export earnings into won.
Economists say exporters are continuing to receive dollars from overseas sales while delaying conversion into won. At the same time, import-dependent companies are buying dollars gradually to cover future payments and manage their foreign-exchange exposure.
“Dollar deposits are growing as export proceeds come in, while exporters delay exchanging them to the Korean won,” Shinhan Bank economist Baek Seok-hyun said, adding that import companies are also actively purchasing dollars in installments.
Why the dollar buildup matters
The latest numbers suggest businesses are becoming increasingly cautious about how they manage foreign-exchange liquidity.
Corporate dollar deposits alone reached about $63.30 billion as of Sept. 3, another record. That was up from roughly $62.81 billion at the end of August, according to Yonhap. Personal dollar deposits also climbed to approximately $13.68 billion, their highest level since February 2022.
The trend is part of a broader increase in foreign-currency holdings in South Korea.
Bank of Korea data showed that total resident foreign-currency deposits reached a record $128.34 billion at the end of July, with U.S. dollar deposits accounting for $108.92 billion. Corporate holdings made up the overwhelming majority of the foreign-currency deposits, rising by $13.57 billion during July alone.
The central bank attributed much of July’s increase to dollar receipts from exporting companies and funds held by Korean brokerages for overseas bond investments.
Individuals are buying dollars, too
The movement is not limited to corporations.
Banks say individual investors have also been taking advantage of the won’s appreciation to purchase dollars. Some of that demand is linked to investment in U.S. stocks, while others may be positioning for future currency movements.
At the five major banks, won-to-dollar conversions totaled about $60 million during the first three days of September. Monthly conversion activity had fallen earlier in the year before rebounding sharply during July and August.
That creates an intriguing contradiction in South Korea’s currency market: the won is getting stronger, yet demand for dollars remains substantial.
The bigger picture
The record dollar deposits do not necessarily mean Korean businesses expect the won to collapse again.
For exporters, holding dollars can simply be a matter of timing. Companies may wait for the right moment to convert export proceeds, particularly when they have future dollar-denominated expenses. Importers, meanwhile, have an incentive to secure dollars in stages rather than risk being caught by a sudden reversal in the exchange rate.
The sharp move in the won also changes the calculus for individuals and investors. A stronger won makes U.S. dollars and dollar-denominated assets cheaper in won terms, potentially encouraging additional purchases.
South Korea’s currency market has therefore entered a striking new phase: the won has recovered dramatically from its July lows, but the demand for dollars has not disappeared.
Instead, businesses and investors appear to be using the stronger won as an opportunity to manage, accumulate and strategically hold foreign currency.
The question now is whether the won’s rally has further to run — or whether the record buildup of dollar deposits is signaling that Korean companies and investors are preparing for another turn in the currency market.
WWC ONE MEDIA M.J.E
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