"Weak Dollar and Higher Investment Returns" June Foreign Exchange Reserves Recover to $410 Billion

South Korea's Foreign Exchange Reserves Reach $410.2 Billion at End of June... Up by $5.61 Billion
US Dollar Index (DXY) Down 1.9% in June... Dollar-Converted Value Rises
Investment Returns Also Increase... 10th Largest Foreign Exchange Reserves in the World as of End of May

South Korea's foreign exchange reserves increased for the first time in three months, recovering to the $410 billion level. This rebound is attributed to two main factors: the rise in the dollar-converted value of non-dollar foreign assets due to the weakening of the US dollar, and an increase in investment returns.

According to the Bank of Korea on July 3, the nation's foreign exchange reserves at the end of last month stood at $410.2 billion, up by $5.61 billion from $404.6 billion at the end of the previous month. During this period, the US dollar weakened, resulting in a relative increase in the dollar-converted value of assets held in other currencies. In June, the US Dollar Index (DXY) fell by about 1.9%. A Bank of Korea official explained, "The increase in investment returns last month was also a factor in the rise of foreign exchange reserves after three months."

South Korea's foreign exchange reserves had steadily increased until the second half of 2021. At the end of October 2021, reserves reached $469.2 billion, but began to decline from 2022, affected by the US Federal Reserve's policy rate hikes. In October last year, heightened uncertainty in trade policy around the election of US President Donald Trump, combined with domestic political risks such as the year-end emergency martial law situation, led to a continued strong dollar. This prompted ongoing dollar sales to defend the exchange rate, resulting in a downward trend. Although there were minor fluctuations, from February to May this year, reserves remained below the $410 billion level.

Among the components of the foreign exchange reserves, securities?which include government bonds, corporate bonds, and government agency bonds?decreased by $1.47 billion from the previous month to $358.5 billion, accounting for 87.4% of total reserves. Deposits increased by $6.86 billion to $26.54 billion (6.5%). Special Drawing Rights (SDR) with the International Monetary Fund (IMF) stood at $15.89 billion (3.9%), gold at $4.79 billion (1.2%), and the IMF position at $4.47 billion (1.1%).

As of the end of May, South Korea ranked 10th in the world in terms of foreign exchange reserves, maintaining its position from the previous month. In March, it fell from 9th to 10th after being overtaken by Germany. Among the top 10 countries, only Japan (2nd) and South Korea (10th) saw a decrease in reserves, with each country’s reserves declining by $100 million.