As the KRW/JPY exchange rate rises, profit-taking occurs... Yen deposits decrease by $430 million [Korea Economic Daily Foreign Exchange Market Watch]

As the KRW/JPY exchange rate rose, yen deposits decreased by more than $400 million last month. This was attributed to individuals and others who had invested in yen taking profits by selling spot foreign exchange. Dollar deposits also saw a slight decrease.

According to the 'November Resident Foreign Currency Deposit Trends' released by the Bank of Korea on the 16th, resident foreign currency deposits at foreign exchange banks were recorded at $98.43 billion at the end of last month, a decrease of $540 million from the previous month.

Yen deposits decreased from $9.8 billion to $9.37 billion, a reduction of $430 million. The Bank of Korea explained, "With the rise in the KRW/JPY exchange rate, individuals and non-financial corporations have been selling spot foreign exchange." The exchange rate per 100 yen rose from 902.20 won at the end of October to 920.87 won at the end of last month. It was observed that those who had invested in yen were taking profits.

Dollar deposits decreased by $110 million to $82.63 billion. Despite the rise in the KRW/USD exchange rate from 1,383.30 won to 1,394.70 won last month, individuals and non-financial corporations sold spot foreign exchange, but the increase in dollar deposits centered on non-bank financial institutions significantly offset the decrease.

There is a forecast that the trend of deposit reduction may continue as the won weakens due to the declaration of martial law this month. The KRW/USD exchange rate rose from 1,401.30 won on the 2nd to 1,433 won on the 13th. In the foreign exchange market on the 16th, it fell to 1,428 won but rebounded sharply in the morning, surpassing 1,436 won.

The KRW/JPY exchange rate also rose significantly to 937.31 won per 100 yen on the 13th, compared to the end of November (in the 920 won range).

Reporter Kang Jin-kyu josep@hankyung.com