Decreasing Reserves

 

Korea's foreign exchange reserves have decreased for 3 months in a row. This is the first time since the financial crisis in 2008. Foreign exchange authorities said that the cause of the decrease was due to the drop in exchange value of the reserve euro and pound against a strong dollar, rather than direct dollar outflow.

The Bank of Korea (BOK) reported on Nov. 5 that the current foreign exchange reserves as of the end of October decreased by US$680 million, or 6.8 percent, from the value of US$363.72 billion last month.

The reserves dropped for 3 months in a row, which was the first drop continuing for three or more months since the global financial crisis of 2008. The reserves decreased for eight consecutive months from April to November 2008.

The reserve renewed record highs for 13 consecutive months in history from July last year but decreased since August this year. The BOK explained that total foreign exchange reserves decreased in the exchange process, as the value of the euro dropped against a strong dollar, not from capital outflow caused by the completion of US quantitative easing or the rumor of base rate rises.

The values of the euro and pound compared to the dollar dropped by 0.7 percent and 1.5 percent, respectively, in October. The value of the yen dropped by 0.1 percent.

If the European Central Bank comes out with additional quantitative easing measures at its monetary policy meeting, the weak euro compared to the dollar is predicted to be identified.

Copyright © BusinessKorea. Prohibited from unauthorized reproduction and redistribution