Super Dollar
The amount of foreign exchange reserves declined by the largest amount ever in two years and four months as the dollar-converted amount of Japanese yen, euro and British pound decreased due to the “super dollar,” the strong U.S. dollar situation.
The Bank of Korea (BOK) announced on Oct. 6 that the amount of foreign exchange reserves was US$364.41 billion as of the end of September, a US$3.13 billion drop from a month before. This is the largest month-on-month decline since May 2012 (US$5.97 billion). Foreign exchange reserves have been recording the highest increases for 13 consecutive months since July last year. However, it started to decrease from August this year.
The U.S. dollar has appreciated relative to other major currencies, as the US economy is recovering steadily, while Europe and Japan cannot keep up. In September, the Japanese yen depreciated 5.2 percent, the euro 3.7 percent, and the British pound 2.1 percent relative to the U.S. dollar. As the foreign reserve is calculated by being converted into U.S. dollars, the entire amount of foreign exchange reserves declined with the depreciation of the other currencies.
The current amount of foreign exchange reserves is manageable at present, but keen attention is required for further appreciation of the U.S. dollar in the future and its consequential chaos in the global financial market. International investors are considering not only the current account surplus but also the foreign exchange reserves when determining their investments in emerging economies.
In detail, securities including government and corporate bonds were US$332.74 billion, accounting for 91.3 percent of the total foreign reserves in September. This is US$2.44 billion less than the previous month. Deposits (5.8 percent) decreased by US$490 million to US$21.23 billion. International Monetary Fund (IMF) Special Drawing Rights (SDR) and IMF Position, rights to draw convertible currencies at any time, shrank to US$70 million and US$120 million, respectively. The amount of gold stayed the same at US$4.79 billion in the previous month.