South Korean FX Deposits Hit Record Decline Amid Won Weakness

South Korea witnessed a historic contraction in foreign-currency deposits during March, driven by a strategic shift among corporate holders reacting to the depreciation of the Korean won. The movement suggests a broad trend of asset reallocation as firms seek to manage currency risk. According to the latest data from the Bank of Korea, deposits held by residents—which include domestic firms, long-term foreign residents, and overseas companies operating within the country—dropped significantly. This trend highlights the pressure exerted by currency volatility on corporate treasury management and the resulting urgency to convert holdings. The total volume of foreign-currency deposits decreased by $15.4 billion, bringing the total balance to $102.2 billion by the end of the month. The Bank of Korea specifically noted that corporate accounts were the primary drivers of this record-breaking decline, indicating that institutional players were more aggressive in their conversions than individual residents. From a market perspective, the conversion of foreign holdings into won suggests that companies are attempting to lock in gains or settle liabilities amidst a weakening local currency environment. This shift reflects the cautious sentiment of South Korean institutional players regarding the won's valuation and the broader macroeconomic outlook for the region.