Investors turn to dollars as alternative to gold bars
Demand for the U.S. dollar is rising sharply as the Korean won weakened against the greenback, with market funds flowing into alternative investment products amid a shortage of gold bars, industry officials said Tuesday.
Due to global economic uncertainty stemming from U.S. President Donald Trump’s tariff policy, the preference for safe-haven assets has been growing, leading to a surge in gold demand that has outpaced supply. As a result, banks here have halted the sale of gold bars since last week.
With investors seeking alternative investment products, the balance of dollar deposits is rising rapidly.
According to commercial lenders, the dollar deposit balance at the five major banks — KB Kookmin, Shinhan, Hana, Woori and NH NongHyup — totaled $67.65 billion as of Friday.
Notably, from Feb. 1 to 13, the balance fluctuated between $63 billion and $64 billion, but on Friday, it surged to over $67 billion.
This is the highest level in nearly two years since January 2023, when the balance stood at $68.23 billion. The figure also increased by 6 percent compared to the end of last year and by 6.5 percent from the previous month.
“Amid heightened economic uncertainty both domestically and internationally, the U.S. dollar is also being recognized as a safe-haven asset, leading to increased demand,” an official at one of the major banks said.
Dollar deposits offer both foreign exchange gains and interest earnings. While interest income is subject to income tax and currency exchange fees, a key advantage is that the interest rate is based on the U.S. benchmark rate, making it higher than that of won-denominated bank deposits.
Generally, when exchange rate uncertainty increases, export and import companies often deposit dollars to hedge against currency fluctuations and secure reserve funds.
The rise in dollar deposit balances is also largely attributed to strong demand from retail investors. Despite the persistently high exchange rate, many are choosing to buy more dollars rather than sell to realize gains, driven by expectations that the dollar’s value will continue to rise.
However, experts say that investors should remain cautious and monitor exchange rate movements closely, as domestic and global uncertainties have not been fully resolved.
Park Sang-hyun, an iM Securities analyst, noted that there is a growing likelihood the dollar has already passed its peak.
“So far this year, the U.S. dollar has been on a weakening trend, with the pace of depreciation gradually expanding,” Park said. “While it is still early in the year and uncertainty remains over Trump’s tariff policies, the likelihood of the dollar maintaining its downward trajectory is growing, marking a shift from last year.”
Source: https://www.koreatimes.co.kr/