South Korea's Foreign Reserves Decline Amid Strengthening US Dollar

Strategic Insights -

South Korea's foreign reserves saw a drop in mid-May from two weeks earlier, attributed to a stronger US dollar that eroded the value of non-dollar assets. The country's foreign reserves stood at $205.8 billion as of Sunday, a $0.6 billion decline from the $206.4 billion recorded at the end of April. The US dollar's strength against South Korea's currency has led to a 4% decline in its value over the first four months of the year, with a 0.44% increase in the first 15 days of May.

Key Takeaways:

  • South Korea's foreign reserves declined by $0.6 billion in mid-May, reaching $205.8 billion.
  • The drop was attributed to the strengthening US dollar, which eroded the value of non-dollar assets.
  • The US dollar's value against South Korea's currency fell 4% in the first four months of the year, but rose 0.44% in the first 15 days of May.
  • South Korea's foreign reserves consist of securities and deposits denominated in foreign currencies, along with International Monetary Fund reserve positions, special drawing rights, and gold.
  • The country trails behind Japan and China in terms of foreign reserves, with Japan holding $843.6 billion and China holding $659.1 billion as of the end of April and March, respectively.
  • Taiwan's foreign reserves stood at $252.6 billion as of the end of last month.
  • The Seoul government and the Bank of Korea (BOK) are exploring ways to manage the rising reserves more profitably.
  • A meeting between BOK Gov. Park Seung and his counterparts from Japan and China will be held on May 27 to discuss foreign reserves and currency issues.
  • The Finance Ministry plans to establish the Korea Investment Corp. on July 1, which will manage an initial $17 billion of the BOK's foreign reserves to boost investment profits.

Statistics:

  • South Korea's foreign reserves: $205.8 billion (as of Sunday)
  • Decline in foreign reserves: $0.6 billion
  • Value of US dollar against South Korea's currency: 1,009.00 won (Monday), up from 1,001.50 won (Friday's close)
  • Percentage decline in US dollar's value: 4% (over first four months of the year)
  • Rise in US dollar's value: 0.44% (in first 15 days of May)
  • Japan's foreign reserves: $843.6 billion (as of the end of April)
  • China's foreign reserves: $659.1 billion (as of the end of March)
  • Taiwan's foreign reserves: $252.6 billion (as of the end of last month)

Sources:

  • Bank of Korea (BOK)
  • Yonhap