Dollar-Savvy Hwan-Tech Enthusiasts... Eyeing the Yen Too

Strong Dollar and Yen Weakness... Investors Busy
Top 5 Banks' Dollar Deposits Drop Nearly 10%
Yen Deposit Balances Increase by 11.5%
Experts Warn "Caution Needed for Large Purchases"

#Office worker Lee Hye-ji (38, pseudonym) realized a profit of about 1.4 million won as the dollar, which she had been buying since early last year, recently strengthened. Using this profit, she bought some yen again and is enjoying 'hwan-tech' (currency exchange + investment). Lee said, "Although high-interest savings products have increased recently, if you time it right, hwan-tech profits seem quite substantial."

#Office worker Kim Seung-hoon (31, pseudonym) has been continuously investing in yen with a small amount of spare funds following news that the yen is falling. Recently, he purchased 300,000 yen and joined the ranks of hwan-tech enthusiasts. Kim said, "I bought it with the intention of holding on unless an urgent need for cash arises."

Hwan-tech Enthusiasts Eyeing the Yen

According to the financial sector on the 17th, hwan-tech enthusiasts have become busy due to the recent strong dollar and weak yen phenomenon. There is an increasing trend of realizing profits in dollars and investing in yen. The strong dollar phenomenon has continued due to the Federal Reserve's (Fed) aggressive tightening and the prolonged Ukraine crisis. The dollar recorded 1,284.1 won, down 0.1 won from the previous trading day's closing price. The dollar, which was in the 1,080 won range early last year, has steadily risen, and the won-dollar exchange rate in the Seoul foreign exchange market briefly surpassed the 1,290 won per dollar level (as of the 12th). Because of this, hwan-tech enthusiasts appear to be actively moving. A representative from a commercial bank said, "Since the dollar is strong, there has been a continuous desire to realize foreign exchange gains, so we have been recommending converting some dollars into won," describing the atmosphere. In fact, the dollar deposit balance at the five major banks (KB, Shinhan, Woori, Hana, Nonghyup) decreased by nearly 10%, from about 59.4 billion dollars (about 76 trillion won) as of December last year to about 53.6 billion dollars (about 69 trillion won) as of May 13.

On the other hand, as the yen has fallen to its lowest level in over 20 years, hwan-tech enthusiasts expecting a rebound are increasing their investments in yen. As of the 13th, the yen deposit balance at the five major banks was 553.6 billion yen, an increase of about 11.5% (56.9 billion yen) compared to the end of last year. Due to the Fed's interest rate hikes and the Bank of Japan's monetary policy, the yen is showing weakness. The won-yen exchange rate has remained in the 990 won range as of the 17th, continuing the weak yen trend after breaking the long-standing 100 yen = 1,000 won formula applied for years in March. Additionally, with the transition to the COVID-19 endemic phase, expectations for travel have increased, and travelers preparing for trips to Japan are also exchanging currency in advance. The weak yen phenomenon is also attracting new hwan-tech enthusiasts. On investment-related cafes, inquiries about how to open foreign currency accounts via mobile and how to buy yen are increasing.

Caution Needed for Large Purchases

However, a cautious approach is necessary for hwan-tech. Although foreign currency deposits are deposits, losses can occur due to exchange rate fluctuations. Experts also advise that so-called 'all-in' investments in yen can be risky. Kim Hyun-seop, head of the KB Kookmin Bank Hannam PB Center, said, "From last year to early this year, the dollar was expected to weaken, but it has gone the opposite way so far. Like stocks, exchange rates are difficult to predict, so it is better to proceed with split selling and buying." He added, "In Japan's case, since the economy is not growing dynamically like other countries, buying a large amount of yen can be risky."