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South Korea's Foreign Currency Crisis: Biggest Drop in 2 Years Amid Corporate Debt

Foreign currency deposits in South Korea saw their biggest monthly drop in nearly two years during October. The decline totaled $5.26 billion, bringing outstanding deposits down to $101.83 billion. Corporate repayments of foreign-currency borrowings and overseas investments by pension funds drove the decrease. Meanwhile, South Korean stocks also traded lower as tech shares faced selling pressure.

Key Points: South Korea Foreign Currency Deposits Drop Most Since 2024

  • Corporate foreign currency deposits plunged $5.5 billion to $86.76 billion
  • Individual holdings increased by $240 million despite overall decline
  • US dollar deposits dropped $5.08 billion while yuan deposits rose
  • South Korean stocks fell sharply with KOSPI losing 1 percent
2 min read

Foreign currency deposits in S. Korea post biggest drop in nearly 2 yrs in Oct

South Korea's foreign currency deposits fell $5.26 billion in October, the sharpest decline in nearly two years amid corporate debt repayments and pension fund investments.

"The decline was due mainly to companies' repayment of foreign-currency borrowings - Bank of Korea Official"

Seoul, Nov 28

Foreign currency deposits in South Korea declined by the most in about two years in October amid increased corporate repayment of foreign-currency borrowings and overseas investments by pension funds, central bank data showed on Friday.

Outstanding foreign currency-denominated deposits held by residents came to $101.83 billion as of end-October, down $5.26 billion from a month earlier, according to data from the Bank of Korea (BOK), reports Yonhap news agency.

It marked the sharpest monthly fall since January 2024, when deposits declined by $5.78 billion, and the second straight month of decrease.

Residents include South Korean citizens, foreigners who have lived in the country for more than six months, and foreign companies. The data excludes interbank deposits.

"The decline was due mainly to companies' repayment of foreign-currency borrowings, a drop in investor deposits at securities firms and overseas investment executions by pension funds, among other factors," a BOK official said.

Corporate foreign currency deposits fell $5.5 billion on-month to $86.76 billion, while individual holdings gained $240 million to $15.07 billion.

By currency, U.S. dollar-denominated deposits dropped $5.08 billion to $85.63 billion, and Japanese yen deposits fell $260 million to $8.63 billion.

Euro deposits were nearly unchanged at $5.01 billion, while Chinese yuan deposits increased $60 million to $1.25 billion, the data showed.

Meanwhile, South Korean stocks traded sharply lower late Friday morning as investors dumped tech shares amid lingering uncertainties over artificial intelligence (AI) technology.

The benchmark Korea Composite Stock Price Index (KOSPI) lost 39.81 points, or 1 per cent, to 3,947.1, as of 11:20 a.m.

Most shares traded in negative territory. Market bellwether Samsung Electronics sank 1.93 percent, and SK hynix fell 0.74 per cent.

Top carmaker Hyundai Motor retreated 0.19 percent, and its sister Kia dropped 0.26 per cent.

Leading battery maker LG Energy Solution tumbled 5.94 per cent, and defense giant Hanwha Aerospace declined 2.2 per cent.

The local currency was quoted at 1,465.5 won against the greenback as of 11:20 a.m., down 0.25 won from the previous session's close.

- IANS

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Reader Comments

R
Rohit P
As someone working in finance, this makes sense. Companies repaying foreign currency loans and pension funds investing overseas - these are typical risk management strategies during uncertain times. Good analysis by BOK.
S
Sarah B
The Chinese yuan deposits actually increased while others fell. Interesting trend! Maybe we should learn from this pattern for our own foreign currency management in India. 🤔
A
Arjun K
While the article is informative, I wish it had more context about how this compares to India's foreign currency situation. Would be helpful for Indian readers to understand the implications better.
V
Vikram M
The stock market decline and currency depreciation together paint a worrying picture. Hope our RBI is watching these global developments closely. Jai Hind! 🇮🇳
M
Michael C
Corporate deposits fell by $5.5 billion while individual deposits actually increased. Shows that retail investors are still confident despite the overall decline. Good insight into market sentiment!

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