SEOUL– South Korea’s foreign reserves fell by the largest amount in more than 13 years in June as foreign exchange authorities unloaded the U.S. dollar to help stem the won’s sharp weakness, central bank data showed Tuesday.
The country’s foreign reserves had stood at US$438.28 billion as of the end of June, down $9.43 billion from the previous month, according to the data provided by the Bank of Korea (BOK).
Foreign reserves consist of securities and deposits denominated in overseas currencies, International Monetary Fund reserve positions, special drawing rights and gold bullion.
The June fall marked the largest since a $11.75 billion on-month decline in November 2008, when South Korea was in the midst of the 2008-09 global financial crisis.
The data also represented the fourth straight month of an on-month fall.
The decline came as a stronger U.S. dollar reduced the value of non-dollar assets and foreign exchange authorities took steps to ease market volatility by unloading their dollar holdings to arrest the South Korean currency’s sharp fall.
The BOK did not provide the amount of dollars sold to stem the won’s descent last month.
According to earlier data from the BOK, foreign exchange authorities sold a net $8.31 billion during the first quarter as part of “market stabilization” efforts that apparently refer to dollar-selling aimed at defending the won’s value.
Market volatility has recently increased as demand for safer assets, such as the dollar, rose amid the Federal Reserve’s aggressive rate hikes and fears about a global recession. The Korean currency fell below the 1,300-won level against the dollar for the first time in nearly 13 years on June 23.
Foreign securities had been valued at $395.27 billion as of end-June, down $6.23 billion from the previous month and accounting for 90.2 percent of the total foreign reserves.
The value of deposits fell $2.64 billion on-month to $19.23 billion, which made up 4.4 percent of the reserves.
South Korea had been the world’s ninth-largest holder of foreign reserves as of the end of May, the BOK said.
Source: Yonhap News Agency