Korea’s FX reserves down for 3rd month in Oct. amid FX stabilization activities

South Korea’s foreign exchange reserves thinned $2.76 billion in October in line with aggressive campaign to defend the Korean won versus soaring U.S. dollar that included dollar-selling activity and the central bank’s currency swap arrangement with the National Pension Service.

According to data released by the Bank of Korea (BOK) on Thursday, the country’s foreign exchange reserves stood at $414.01 billion at the end of October, down $2.76 billion from the previous month. The reserves have been ebbing since August.

The country’s foreign exchange reserves lost $19.66 billion in September from the previous month to mark the biggest decline since $27.4 billion in October 2008 in the wake of global financial crisis.

Foreign currency deposits and the value of other foreign currency assets in dollars rose in October but foreign exchange reserves fell due to measures to ease volatility in foreign exchange market, the central bank said.

The forex supply conditions were less volatile last month after the institutional major entered a currency deal with foreign currency authority.

Under a swap deal, the NPS can borrow up to $10 billion in dollars from the BOK until the end of the year instead of buying dollars directly from the market for overseas investment. The move was taken to contain the fall in the Korean won versus the greenback.

By asset type, securities including government and corporate bonds thinned $17.06 billion in October from a month ago to $362.4 billion. Deposits stood at $28.3 billion, up $14.1 billion from the previous month.

The special drawing rights from the International Monetary Fund (IMF) also rose $160 million to $14.3 billion and the reserve position, or portion of required quota of currency held with the IMF that can be withdrawn, $30 million to $4.26 billion.

Gold holding were unchanged at $4.79 billion.

Korea was the ninth-largest holder of foreign exchange reserves in the world as of end of September. China had the largest reserves of $3.03 trillion, followed by Japan $1.2 trillion, Switzerland $892.1 billion, Taiwan $541.1 billion, and Russia $540.7 billion.

By Lee Eun-joo