Korea’s foreign exchange reserves fell for the second consecutive month in September as the U.S. dollar continued to strengthen.
Korea’s foreign exchange reserves stood at US$414.1 billion at the end of September, down by US$4.18 billion from US$418.3 billion at the end of August, according to foreign exchange reserve statistics released by the Bank of Korea (BOK) on Sept. 6,.
They swelled in June and July but after beginning to shrink in August, they marked the second consecutive month of a decline.
"This was blamed on a decrease in the U.S. dollar equivalent of Korea’s foreign assets in other currencies and measures to ease volatility in the foreign exchange market," a BOK official explained. This means that as the U.S. dollar appreciated by about 3.0 percent based on the U.S. dollar index in September, the amount of Korea’s foreign assets in other currencies converted into U.S. dollars shrank.
In addition, this was partly because Korea’s foreign exchange authorities released U.S. dollars as the strengthening of the U.S. dollar caused the won-dollar exchange rate to rise. Other measures to mitigate exchange rate volatility included the supply of U.S. dollars under a foreign exchange swap agreement between the Korean National Pension Service and the Bank of Korea.
Breaking down foreign exchange reserves by asset, securities such as government and corporate bonds declined by US$6.44 billion to US$372.59 billion and special drawing rights to the International Monetary Fund (IMF) descended by US$250 million.
Conversely, deposits increased by US$2.56 billion to US$17.4 billion and gold remained unchanged at US$4.79 billion, as it was marked at the price at which it was purchased, not at its market price.
Korea’s foreign exchange reserves (US$418.3 billion) ranked ninth in the world at the end of August. After moving up to eighth place by one notch in July and holding staying at eighth place for two consecutive months until August, it slipped back down to ninth place after three months.
China had the largest amount of foreign exchange reserves at US$3.1601 trillion, followed by Japan (US$1.2512 trillion), Switzerland (US$865.2 billion), India (US$598.2 billion), Russia (US$581.7 billion), Taiwan (US$565.5 billion), Saudi Arabia (US$426.9 billion), and Hong Kong (US$418.4 billion).