South Korea makes checks on increasing US dollar deposits as won falls

[SEOUL] South Korean authorities summoned seven local banks last week to question them about increasing US dollar deposits, officials and bank sources said on Monday (Jan 12), amid growing expectations of extended weakness in the won.

Foreign exchange authorities held a meeting with the seven banks on Wednesday to make checks on foreign deposits and foreign exchange-related services, two bank sources told Reuters.

An official at the Ministry of Economy and Finance confirmed the meeting was held, but did not provide details.

“It seems authorities are seeing marketing activities of securities firms and banks as the reason behind the US dollar-won rate trading beyond its usual range,” one bank source said, declining to be identified as they were not authorised to speak to media.

Another source said: “It seems difficult for authorities to do anything other than preventing exchange rates from overshooting”, because customers were not selling US dollars.

The Financial Supervisory Service also recently asked local banks about increasing US dollar deposits to check overall numbers, trends and to assess if any precautions needed to be taken, an official said.

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The won weakened as much as 0.75 per cent to 1,470.0 per US dollar on Monday, extending losses for a ninth straight session to the weakest level in more than two weeks.

Late last month, authorities rolled out market-stabilising measures to support the won, prompting a short-lived rebound from eight-month lows.

South Korea said last week it will open up its currency market to allow 24-hour trading starting in July, further removing restrictions on onshore trading in a bid to win an upgrade to developed-market status. REUTERS