More than 2 trillion won flowed out of dollar deposits at commercial banks in a single day. As factors pushing up the exchange rate eased, such as a slight thaw in U.S.-Europe tensions over Greenland, depositors appear to have rushed to sell dollars to take profits.
According to the financial sector on the 23rd, the dollar deposits balance at the five major commercial banks (KB Kookmin, Shinhan, Hana, Woori, NH Nonghyup) stood at about $64.5 billion as of the 21st. That was down $1.5 billion (about 2.2 trillion won) from the previous day's $66.0 billion.
A financial industry official said, "The exchange rate's year-end climb briefly paused and then rose again, and depositors seem to have judged the current rate to be the 'peak' and moved to take profits."
With the won-dollar rate soaring at the end of last year, dollar deposits balances at banks rose quickly. The five major commercial banks' dollar deposits balances were $61.8 billion at the end of November last year and $67.2 billion at the end of December.
Banks expect balances to keep falling for a while as selling by dollar depositors continues. The biggest factor is that the U.S.-Europe conflict over Greenland has been partly resolved. U.S. President Donald Trump said in the early hours of the 21st (Korea time) that he had laid the groundwork for a future agreement on Greenland and decided to defer imposing a tariff on eight European countries. After that, the won-dollar rate opened at 1,467 won in the Seoul foreign exchange market, down 4.3 won from the previous day. On the 21st, the won-dollar rate closed at 1,469.9 won, down 1.4 won from the previous day. At one point during the session, it fell to 1,464.40 won.
The government's close attention to the exchange rate is also seen to have had an impact. President Lee Jae-myung said at a New Year's press conference on the 21st, "Authorities predict it will fall to around 1,400 won in a month or two," adding, "We will continue to identify feasible tools and work to stabilize the exchange rate."
The government is pressuring commercial banks to stabilize the exchange rate. The Financial Supervisory Service convened executives from commercial banks on the 19th and asked them to draw up measures related to the high exchange rate. Financial Supervisory Service Governor Lee Chan-jin also said on the 13th, "Through meetings with commercial bank management, please guide financial firms to refrain from excessive (dollar deposits) marketing and events."