June Foreign Exchange Reserves Reach $410.7 Billion 'All-Time High' (Comprehensive)

[Image source=Yonhap News]

[Asia Economy Reporter Kim Eunbyeol] South Korea's foreign exchange reserves have reached an all-time high.

According to the 'Foreign Exchange Reserves as of the End of June 2020' announced by the Bank of Korea on the 3rd, the foreign exchange reserves stood at $410.75 billion as of the end of June, an increase of $3.44 billion compared to the end of the previous month. This is the largest amount ever recorded, surpassing $410 billion for the first time.

A Bank of Korea official explained, "This is due to earnings from foreign currency asset management and the depreciation of the US dollar, which increased the dollar value of foreign currency assets denominated in other currencies." The Bank of Korea applies the won-dollar exchange rate at the end of each month to convert other foreign currency assets into US dollars when calculating the size of foreign exchange reserves. When the US dollar weakens, the value of other foreign currency assets relatively increases.

Last month, the dollar index, which indicates the value of the US dollar against the six major currencies, recorded 97.54, down 0.9% from the previous month (indicating a decline in the dollar's value). The US dollar depreciated because the economic recovery in the US is expected to be slower compared to other countries, and the number of confirmed COVID-19 cases has not significantly decreased.

Due to the impact of COVID-19, South Korea's foreign exchange reserves sharply decreased in March but have been on the rise since April. In March, the foreign exchange authorities used reserves to stabilize the volatile market, causing a sharp drop of $8.96 billion to $400.21 billion, but the market stabilized afterward, and the reserves increased consecutively.

Looking at the composition of assets, securities, which account for 90.7% of the foreign exchange reserves, increased by $6.88 billion to $372.58 billion compared to the previous month. Deposits rose by $280 million to $26.04 billion. The IMF position, which is the drawing rights for exchangeable currency with the International Monetary Fund (IMF), increased by $260 million to $4.25 billion. IMF Special Drawing Rights stood at $3.08 billion, and gold holdings remained unchanged at $4.79 billion compared to the previous month.

Meanwhile, as of the end of May, South Korea's foreign exchange reserves ranked 9th globally at $407.3 billion. China had the largest reserves at $3.1017 trillion, followed by Japan ($1.3782 trillion) and Switzerland ($912 billion).