How to Use Dollar RP and Foreign Currency Deposit Accounts, Step-by-Step After Currency Exchange

TL;DR

• Dollar RP and foreign currency deposit accounts are used to short-term manage or store exchanged dollars.
• The steps are exchange, deposit to a foreign currency account, product selection (RP etc.), maturity, then exchange back or reinvest, and fees and tax rates must be checked with each provider.

Know the basics of Dollar RP and foreign currency deposit accounts before you start

Dollar RP refers to short-term interest products in the form of repurchase agreements offered by securities firms. A foreign currency deposit account is a custodial account to hold foreign currency at a securities firm. Both are mainly used after converting won to dollars to manage funds. Product structure, risk level, and exposure to exchange rates differ by product, so check terms and conditions before subscribing.

Step-by-step from currency exchange to deposit in a foreign currency account

1. Exchange request: Request a currency exchange at a bank or securities firm. Compare exchange rate discounts and fees for online exchanges.
2. Designate a foreign currency deposit account: If you do not have a securities account, open a foreign currency deposit account. If you already have one, select that account for foreign currency deposit or exchange.
3. Confirm exchange completion and deposit: Verify that dollars are deposited into the foreign currency account after exchange. Processing may take business days.

How to operate with Dollar RP and precautions

1. Check products: Search dollar RP products on the broker web/app. Confirm maturity, interest payment method, and repurchase terms.
2. Purchase procedure: Use dollars in the foreign currency account to purchase RP. Check purchase units and minimum investment amount before placing an order.
3. Maturity receipt and reinvestment: At maturity, principal and interest are deposited into the foreign currency account. Decide whether to reinvest or exchange back to won.

Note: RP is affected by short-term interest rate changes. Since it is denominated in foreign currency, exchange rate fluctuations can cause gains or losses.

Tax, fees, and exchange rate risk management

Taxes, fees, and preferential exchange rates vary by securities firm. Tax rates and taxation methods may change, so check the latest standards with the National Tax Service or your securities firm. Also, calculate exchange costs, spreads, and potential gains or losses from exchange rate volatility in advance to manage risk.

Checklist for beginners

• Have you compared exchange fees and rate discounts
• Do you have a foreign currency deposit account opened
• Have you checked the maturity, interest rate, and repurchase terms of the dollar RP
• Have you confirmed that tax and taxation standards are up to date (check with securities firm/National Tax Service)

This article is for information only and does not constitute investment solicitation.