SEOUL, October 06 (AJP) -South Korea’s foreign exchange reserves fell by $1.72 billion in September — the third-largest decline this year — as the country prepares to bankroll its pledged energy investments in the United States, highlighting potential pressure on its reserve holdings and the won.
Foreign reserves stood at $440.56 billion at the end of September, down from $442.28 billion a month earlier, according to the Bank of Korea (BOK).
The decline was the largest since March, when reserves fell $3.97 billion, and followed a $2.15 billion decrease in January. It was also the first monthly fall since May, ending three consecutive increases.
The reversal followed a record $14.33 billion jump in August, the largest monthly increase since the BOK began compiling the data in 1971.
The BOK attributed September’s decline mainly to lower foreign-currency deposits held by financial institutions, the entrustment of assets to the Korea-U.S. Strategic Investment Corporation and a fall in the dollar value of assets denominated in other currencies.
It was the first time the central bank had cited asset entrustment to the corporation as a factor in its monthly reserve figures.
The BOK said investment income partly offset the decline but did not disclose the amount. It also said no specific amount or timetable had been set for additional asset entrustment to the corporation.
The won showed little movement, with the dollar quoted at 1,342.5 won as of 7:26 a.m. in Seoul.
South Korea last week pledged to remit up to $10 billion by the end of December for U.S. nuclear reactor projects as part of its $200 billion strategic investment commitment.
The energy initiatives include a $22.3 billion gas-fired power project and a $120 billion framework to support the construction of eight nuclear reactors. The headline project values do not represent immediate withdrawals from Korea’s foreign reserves, with further funding dependent on project schedules and investment arrangements.
Currency movements also weighed on September’s reserve valuation.
The dollar index rose 1.7 percent during the month on a Korea-time basis. The euro weakened 2.1 percent against the dollar, the British pound 2.3 percent and the Australian dollar 2.4 percent, reducing the dollar value of reserve assets held in those currencies. The Japanese yen strengthened 1.8 percent.
By asset type, securities fell $1.05 billion to $386.03 billion, accounting for 87.6 percent of total reserves.
Deposits declined $350 million to $29.95 billion, while Special Drawing Rights — an international reserve asset created by the International Monetary Fund — fell $290 million to $15.48 billion.
Korea’s reserve position at the IMF declined $40 million to $4.30 billion. Gold holdings remained unchanged at $4.79 billion.
September’s release was the second since the BOK stopped publishing a country-by-country ranking of global foreign exchange reserves in its monthly report, ending a practice of more than 25 years.
The central bank again directed readers to its Economic Statistics System, known as ECOS, for reserve data on major economies.
AJP Takeaways
- South Korea’s foreign exchange reserves fell $1.72 billion to $440.56 billion in September, the largest decline since March and the third-largest monthly drop this year.
- The BOK attributed the decline mainly to lower foreign-currency deposits, first-time asset entrustment to the Korea-U.S. Strategic Investment Corporation and currency valuation effects.
- The BOK’s September-end data marked the second monthly foreign-reserve disclosure since the central bank removed its country-by-country global reserve ranking from the release.
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