Dollar drain not seen after FX liberalization

The Ministry of Finance and Economy (MOFE) said that there was no abrupt dollar drain in January, during which the government implemented the second-phase foreign exchange liberalization step, even though there were earlier concerns. External current payments by residents, including remittances for gifts, decreased slightly from $328 million in December last year to $322 million in January this year.

Remittances for gifts amounted to $10.8 million in 11 cases last month. Most remittances were for expenses for stays in foreign countries, not for the flight of assets, it said.

There were 187 cases last month in which $10,000 or more in foreign currency was taken out of the country, for a total of $3.5 million. This figure represents just 1% of the total amount in cases where $10,000 or more in foreign currency was brought in.

Foreign currency borrowings and overseas deposits by individuals, which began to be liberalized from early this year, reached only one or two cases, and the purchasing volume of foreign currency for the purpose of holdings was not so great.

The outflow of domestic financial assets by Koreans abroad came to $2.2 million in 13 cases, and most of them were won currency-denominated assets that they had earned through their economic activities in Korea or lease security. The volume on the foreign exchange market among banks amounted to $3.02 billion in January, a similar level to that recorded a year earlier.

The won, which had showed a steep depreciation against the dollar since the fourth quarter of last year, has regained its strength thanks to the inflow of foreign investment funds into the country.