"Giving 5%?" Yetech Tribe, Dollar Deposits 'Peeking'

As deposit interest rates at major commercial banks mostly remain in the 3% range, savers combining deposits and investment strategies (Yetech) are paying attention to dollar deposits. Dollar deposits offer interest rates approaching 5%, along with the advantage of no taxes on foreign exchange gains.

According to the financial sector on the 7th, the 12-month dollar time deposit interest rates for residents at the five major banks (KB Kookmin, Shinhan, Hana, Woori, NH Nonghyup) range from 4.76% to 5.33%. This is 1.06 to 1.53 percentage points higher than comparable won-denominated time deposit products. The representative time deposit interest rates at the five major banks stand at 3.7% to 3.8% as of this date.

The rise in dollar time deposit interest rates is due to the U.S. Federal Reserve (Fed) raising interest rates. Last month, the Fed increased the benchmark rate by 0.25 percentage points from 4.5% to 4.75% annually. As the cost of raising dollars increased, banks have competed to attract dollar deposits. KB Kookmin Bank and Shinhan Bank are offering preferential exchange rate benefits and higher interest rates through new subscription events. Furthermore, with the likelihood of the Fed raising rates further, the high-interest trend for dollar deposits is expected to continue.

In fact, new subscriptions for dollar time deposits have shown a slight increase. At one major commercial bank, new dollar deposit subscriptions rose 14% from 4,948 cases in December last year to 5,633 cases in February this year. Another bank saw an increase of about 10%, from 5,210 to 5,735 cases during the same period. A commercial bank official said, "Assuming the dollar continues to rise, dollar deposits are advantageous due to higher interest rates, but caution is needed regarding foreign exchange losses that may occur when converting back to won at maturity."

Experts also recommend subscribing to dollar time deposits only if one already holds dollars. Jeong Seong-jin, Deputy Head of KB Kookmin Bank Gangnam Star PB Center, said, "If you already have dollars, there is no reason not to take out a dollar time deposit. At this point, the interest rate is much higher than regular time deposits," but advised, "However, since the dollar is still at a high point, I do not recommend exchanging won for dollars now."