Strong dollar pressures Korea's FX reserves, down for 2nd month

SEOUL, February 04 (AJP) - South Korea’s foreign exchange reserves fell by more than $2 billion in January, extending a decline for a second consecutive month as the won remained weak against the U.S. dollar.

The Bank of Korea said Wednesday that reserves stood at $425.91 billion at the end of January, down $2.15 billion from $428.05 billion a month earlier.

Holdings of securities, including government and corporate bonds, rose $6.39 billion to $377.52 billion. However, deposits dropped $8.55 billion to $23.32 billion.

Special drawing rights allocated by the International Monetary Fund remained unchanged at $15.89 billion, while gold holdings were also steady at $4.79 billion, as they are recorded at purchase price rather than market value.

A Bank of Korea official said deposits typically increase at quarter-end or year-end as financial institutions adjust balance sheets to meet regulatory ratios. This time, however, overall deposits declined despite an increase in foreign-currency deposits at financial institutions.

The official added that market-stabilization operations, including foreign exchange swaps and reserve requirement management, appeared to have influenced the overall reserve level.

South Korea ranked ninth globally in foreign exchange reserves as of the end of December, with holdings of $428.1 billion. China held the largest reserves at $3.36 trillion, followed by Japan with $1.37 trillion and Switzerland with $1.08 trillion.

Other countries ahead of South Korea included Russia, India, Taiwan, Germany and Saudi Arabia, according to central bank data.

* This article, published by Aju Business Daily, was translated by AI and edited by AJP.