Koreans' yen savings fall on profit-taking despite BOJ rate hike views

Yen-denominated deposits in South Korea fell in November, dragging down overall foreign-currency savings, as investors took profits from the Japanese unit’s strength against the Korean won currency amid expectations the Bank of Japan may raise interest rates.

The balance of yen savings at Korean banks fell by $430 million in November to $9.37 billion as of the end of month, while total foreign-currency deposits slid $540 million to $98.43 billion over the same period, Bank of Korea (BOK) data showed on Monday.

“Yen savings fell as the rise in the yen/won exchange rate prompted non-financial companies and individuals to increase selling of spot yen,” the central bank said in a statement.

The yen gained 20.7% against the won in November compared with the prior month as the Bank of Japan was expected to raise interest rates. In a surprise move last month, the Bank of Korea lowered its policy rates for a second straight meeting while leaving the door open for another cut during the next three months.

FOREIGN CURRENCY DEPOSITS TO FALL FURTHER

US dollar-denominated deposits fell by $110 million to $82.63 billion in November versus the prior month, according to the BOK.

Retail investors and non-financial companies dumped spot dollars, which appreciated 0.8% against the won month-on-month, while dollar savings at non-bank depository institutions surged, the central bank said.

Koreans' foreign-currency deposits are expected to fall further this month as both the dollar and the yen have strengthened against the won after President Yoon Suk Yeol declared martial law on Dec. 3, industry sources said. Korea's parliament voted to impeach him over the decree on Dec. 14.

The dollar and the yen have gained 2.9% and 1.4%, respectively, against the won so far this month.

Write to Jin-gyu Kang at josep@hankyung.com
 
Jongwoo Cheon edited this article.