Foreign Currency Reserves

 

Korea's foreign-exchange reserves reached an all-time high for 12 consecutive months, and the nation is likely to overtake Brazil in the sixth spot in the near future. The reason for an increase in the nation's forex reserves is due to the fact that the Korean government issued foreign currency-denominated foreign exchange stabilization bonds. The government also purchased dollars in the foreign exchange market to prevent a decline in the won-dollar rate.

Foreign currency reserves keep climbing.On July 3, the Bank of Korea (BOK) announced that the nation's foreign currency reserves amounted to US$366.55 billion as of late June, an increase of US$5.63 billion from the previous month. The month-over-month increase in June exceeded the prior record of US$6.3 billion in October of last year, which is the highest-ever in 8 months. The country's FX reserves hit a record high for 12 months in a row, after recording US$329.71 billion in July 2013.

A BOK official said, “The nation's increased foreign-exchange reserves are attributable to foreign exchange stabilization bonds worth US$2 billion issued by the government.” On June 4, the Ministry of Strategy and Finance issued 30 year-maturity U.S. dollar-denominated bonds valued at US$1 billion and 10-year euro-denominated bonds worth €750 million (US$1.02 billion). The official explained, “A strong euro and pound led to the increased value of euro reserves converted in USD, which contributed to a rise in the nation's FX reserves.”

Korea ranked 7th in FX reserves following Brazil. Korea's foreign-exchange reserves totaled US$360.9 billion as of late May, smaller by US$7.9 billion than the US$368.8 billion of Brazil.

An analyst at Hyundai Securities pointed out, “We can become the sixth-largest forex reserve-holding country if our country continues the surplus trend in its current account balance, and the government also continues to intervene in the foreign exchange market.”

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