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/ Yonhap

South Korea's foreign exchange reserves decreased by 1.72 billion dollars last month, turning downward for the first time in four months. While returns on foreign currency asset management were generated, foreign currency deposits by financial institutions shrank, and assets were entrusted to the Korea-U.S. Strategic Investment Corporation. Continued strength in the U.S. dollar also exerted downward pressure.

According to the Bank of Korea on the 6th, the nation's foreign exchange reserves stood at 440.56 billion dollars (approximately 591.45 trillion won) at the end of September, down 1.72 billion dollars from the previous month. Unlike August, when reserves surged by 14.33 billion dollars in a single month driven by increases in financial institutions' foreign currency deposits, September saw a reversal into contraction.

The central bank explained that despite gains from foreign asset operations, a drop in foreign currency deposits held by financial institutions and the asset consignment to the Korea-U.S. Strategic Investment Corporation contributed to the decline. However, the Bank of Korea noted that future consignment amounts or timelines for the corporation have not yet been determined.

Translation effects stemming from the strong U.S. dollar also weighed on reserves. During September, the U.S. Dollar Index, which measures the greenback against a basket of six major currencies, climbed 1.7% from 99.70 to 101.37. As market interest rates showed a robust upward trend under the impact of U.S. benchmark rate hikes, the value of the dollar gained ground.

Over the same period, the euro depreciated 2.1% against the dollar, the British pound fell 2.3%, and the Australian dollar weakened 2.4%. As the dollar strengthened against major peers, the converted dollar value of non-dollar foreign currency holdings, such as euro-denominated assets, diminished.

By asset category, securities totaled 386.03 billion dollars, accounting for 87.6% of total reserves, a drop of 1.05 billion dollars month-on-month. Deposits stood at 29.95 billion dollars, down 350 million dollars. Special Drawing Rights (SDRs) reached 15.48 billion dollars, decreasing by 290 million dollars, while the International Monetary Fund (IMF) reserve position fell by 40 million dollars to 4.3 billion dollars. Gold reserves remained unchanged from the preceding month at 4.79 billion dollars.

                                                                                                          Han Sang-wook