Home > Business > Finance

Koreans seek safety in U.S. dollar as won faces prolonged slump

Published: 02 Jan. 2026, 11:45

An official holds up U.S. bills at Hana Bank's counterfeit response center in Jung District, central Seoul, on Dec. 17, 2025. [YONHAP]

Korea’s prolonged currency slump is driving individuals and companies to park more funds in dollar deposits, attracted by both exchange-rate uncertainty and higher U.S. interest rates, industry data showed Thursday.

As of Tuesday, dollar deposits held by individuals and companies at the country’s five largest banks — KB Kookmin, Shinhan, Hana, Woori and NH NongHyup — stood at $67.8 billion, according to financial sector data.

The total has risen sharply in recent years, increasing from $33.9 billion in 2020 to $58.8 billion in 2021 and peaking at $74.3 billion in 2022, before easing during 2023 and 2024. Deposits rebounded again last year.

Bank of Korea data show a similar pattern. Foreign-currency deposits held by residents at domestic banks reached $103.55 billion at the end of November, up $1.71 billion from a month earlier. Dollar deposits led the increase, rising by $1.96 billion.

Under normal conditions, a weaker won — which corresponds to a higher dollar-won exchange rate — tends to prompt profit-taking, reducing dollar deposit balances. Last year, however, deposits continued to rise even as the Korean currency depreciated.

Gold and silver products are displayed at a jewelry store in Seoul on Dec. 31, 2025. [NEWS1]

Analysts attribute the trend to heightened demand for safe assets as uncertainty has increased in global and domestic markets. Surging gold and silver prices point to broader risk aversion, while increased exchange-rate volatility has strengthened the appeal of dollar deposits as a hedge.

Interest rate differentials have also supported demand. With U.S. policy rates higher than those in Korea, dollar deposits have become more attractive for individuals and companies that already hold dollars.

Market participants expect the trend to persist this year. While some global investors anticipate a weaker dollar on expectations of U.S. rate cuts, analysts say concerns over the won and demand for safe assets may continue to dominate domestically.

Dollar buying and deposits increased even after the government announced strong measures to stabilize the exchange rate last month.

At one bank, dollar deposits rose by $1.3 billion over the past month alone, a period marked by sharp won weakness. Some bank branches ran out of $100 bills shortly after the government's policy announcement.

"Contrary to the government’s expectations, market anxiety proved stronger," said Baek Seok-hyun, an economist at Shinhan Bank. "After experiencing prolonged won weakness, individuals and companies have increasingly come to believe they should buy dollars whenever [the won] strengthens.”

Currency exchange rates are displayed at a screen in Myeong-dong in central Seoul on Dec. 31, 2025. [NEWS1]

Expectations are growing among investors that the won will weaken further.

"Signs suggesting expectations of additional won weakness remain visible even after the government measures,” said Park Hyung-jung, an economist at Woori Bank. "On an annual average basis, the dollar-won rate this year is likely to exceed last year’s average." Last year's average rate was 1,422 won against the greenback.

Economists say dollar deposits can serve as a defensive allocation for those already holding the currency.

"For individuals and companies that already own dollars, deposits remain the most rational choice in an environment where U.S. interest rates are higher than domestic rates," Park said.

Analysts also caution against aggressive dollar buying.

"Investing in dollars solely as a bet on the won’s direction carries significant risk,” Baek said, adding that investors should “diversify exchange-rate risk through foreign-currency-denominated stocks or bonds.”

This article was originally written in Korean and translated by a bilingual reporter with the help of generative AI tools. It was then edited by a native English-speaking editor. All AI-assisted translations are reviewed and refined by our newsroom.
BY KIM WON [[email protected]]