Individual dollar deposits in S. Korea rise on Fed's rate hike expectations

Individual U.S. dollar deposits in South Korea increased last month to a record high level on expectations that the U.S. Federal Reserve would raise interest rates, central bank data showed on Monday.

Foreign currency deposits held by residents reached 66.5 billion dollars as of end-September, down 0.84 billion dollars from a month earlier, according to the Bank of Korea (BOK). Residents refer to South Koreans and foreigners staying here for more than six months.

Companies withdrew money from deposit accounts denominated in the dollar and the Chinese yuan, but individuals deposited money in the dollar account on expected rate hike in the United States.

Individual dollar deposits hit a new monthly high of 9.68 billion dollars as of end-September, up 0.77 billion dollars from a month ago. During the July-September period, individual dollar deposits increased 2.67 billion dollars.

The Fed is widely forecast to lift rates by the end of this year, encouraging South Korean individual investors to put their money in the dollar account. Higher interest rates in the U.S. usually lead to higher dollar value versus the South Korean currency.

South Korea's central bank has kept its benchmark interest rate on hold at an all-time low of 1.25 percent since the bank cut the rate by 25 basis points in June.

Dollar deposits held by companies reduced 1.17 billion dollars from a month earlier to 46.84 billion dollars at the end of September.

The Chinese yuan deposits declined 0.3 billion dollars to 1.6 billion dollars last month as securities firms withdrew money from the yuan time deposits that matured.

Deposits denominated in the European single currency came in at 3.05 billion dollars as of end-September, down 40 million dollars from a month earlier. Endit