Corporate Dollar Hoarding Skyrockets Amid Trump's Inauguration Risks

In the wake of President Donald Trump's inauguration, a significant surge in corporate foreign currency deposits has been observed. This trend underscores the growing unease among importers and exporters, leading to an unprecedented increase in precautionary funds. Last month alone, corporate foreign currency deposits soared by over $3.1 billion, reflecting the market's response to heightened uncertainties.

Bank of Korea Reports Sharp Increase in Foreign Currency Deposits

According to the latest 'Resident Foreign Currency Deposit Trends' report by the Bank of Korea (BOK), the balance of resident foreign currency deposits at foreign exchange banks reached $101.3 billion by the end of December. This marks a significant rebound, with an increase of $2.87 billion from November, following two consecutive months of decline. The report highlights the growing preference for U.S. dollar deposits among corporations, which rose by $3.8 billion to $86.43 billion, despite the rising exchange rates.

Global Uncertainties Drive Dollar Demand

A BOK official attributed the surge in dollar holdings to the expanding domestic and international uncertainties, including political instability and the anticipation of Trump's second-term inauguration. The average won-to-dollar exchange rate witnessed a notable increase, further fueling the demand for dollars among companies seeking to mitigate market unease.

Shift in Currency Preferences

While U.S. dollar deposits saw a significant rise, Japanese yen deposits experienced a decrease, attributed to profit realization by residents following the rise in the won-yen exchange rate. Conversely, euro and Chinese yuan deposits saw modest increases, reflecting the dynamic shifts in currency preferences among corporations and individuals alike.