Has S. Korea's Foreign Reserves Finally Rebounded After Three Months?
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Synopsis
In a significant turnaround, South Korea's foreign reserves have increased for the first time in three months, showing a recovery from the lowest levels noted in five years. This article explores the latest data and implications for the economy.
Key Takeaways
- South Korea's foreign reserves rose to $410.2 billion in June.
- This increase marks the first rebound in three months.
- The rise is due to a weaker dollar and increased investment returns.
- Foreign securities make up 87.4% of total reserves.
- The country ranks 10th globally for foreign reserves.
Seoul, July 3 (NationPress) South Korea's foreign reserves saw a notable recovery in June after hitting the lowest point in five years, as indicated by central bank statistics released on Thursday.
The nation’s foreign reserves reached US$410.2 billion at the close of June, reflecting an increase of $5.61 billion from the previous month, according to the Bank of Korea (BOK). This represents the highest level since January, when reserves were recorded at $411.01 billion.
After experiencing declines for two successive months since April, the reserves fell to their lowest since April 2020, which was $403.98 billion, as reported by Yonhap news agency.
The increment last month was mainly due to a rise in the U.S. dollar-denominated value of foreign currency assets linked to other currencies, prompted by a weaker dollar, alongside improved investment returns, as stated by the BOK.
As of the end of June, the value of foreign securities, including U.S. Treasuries, stood at $358.5 billion, up $1.47 billion from May, making up 87.4 percent of total foreign reserves.
Deposits also saw a monthly increase of 6.5 percent, reaching $26.54 billion during the specified period.
Additionally, Special Drawing Rights (SDRs) and gold reserves increased to $15.89 billion and $4.79 billion, respectively, while the country's International Monetary Fund (IMF) reserve positions rose 1.1 percent to $4.47 billion by the end of June.
As of the end of May, South Korea was recognized as the world’s 10th-largest holder of foreign reserves.
China led the rankings, followed by Japan, Switzerland, India, and Russia, according to the BOK.
This undated image shows a banker monitoring dollar transactions at Hana Bank's Counterfeit Notes Response Center in Seoul. (Yonhap)
In other news, the sale of derivative-linked securities in South Korea surged in the first quarter compared to the previous year, as per the data.
The total value of equity-linked securities (ELS) and derivative-linked securities (DLS) issued in the first quarter reached 15.8 trillion won ($11.65 billion), which is an increase of 2.8 trillion won from a year prior, according to the Financial Supervisory Service.
The outstanding value was 84.6 trillion won at the end of March, reflecting an increase of 3 trillion won over the same period.
Point of View
It is vital to acknowledge the significance of the recent increase in South Korea's foreign reserves. This rebound not only reflects a recovery from prior lows but also highlights the resilience of the national economy in adapting to global currency fluctuations. It is a positive sign for investors and markets alike, and we must remain vigilant in monitoring how these trends develop.
NationPress
03/07/2025
Frequently Asked Questions
What caused the rise in South Korea's foreign reserves?
The increase is attributed to a rise in the U.S. dollar-converted value of foreign currency assets due to a weaker dollar, along with higher investment returns, as stated by the Bank of Korea.
How significant is South Korea's foreign reserves position globally?
As of the end of May, South Korea ranks as the world's 10th-largest holder of foreign reserves, a notable position among major economies.
What are derivative-linked securities?
Derivative-linked securities are financial instruments whose value is derived from the performance of an underlying asset, index, or interest rate, commonly used for hedging or speculative purposes.
