Impact of $3 Billion Foreign Currency Stabilization Bond Issuance... Foreign Exchange Reserves Rebound After Three Months

As of End-February, Foreign Exchange Reserves Rise to $427.62 Billion, Up by $1.72 Billion

Increase Despite FX Swaps with National Pension Service and Decline in Other Currency Assets

Boosted by New Foreign Currency Stabilization Bonds and Income from Reserve Management

South Korea's foreign exchange reserves rebounded for the first time in three months, reaching the 427 billion dollar level. Despite market stabilization measures such as foreign exchange swaps with the National Pension Service, the increase was driven by the issuance of 3 billion dollars in new foreign currency stabilization bonds (Foreign Exchange Equalization Fund Bonds).

According to the Bank of Korea on March 5, as of the end of February, South Korea's foreign exchange reserves stood at 427.62 billion dollars, up by 1.72 billion dollars from the end of the previous month (425.91 billion dollars). Despite market stabilization measures such as foreign exchange swaps with the National Pension Service, and a decrease in the US dollar-converted value of assets denominated in other currencies, the issuance of 3 billion dollars in new foreign currency stabilization bonds and income from the management of foreign exchange reserves led to the turnaround in reserves.

South Korea's foreign exchange reserves steadily increased until the second half of 2021, reaching a record high of 469.2 billion dollars at the end of October 2021. However, the reserves began to decline due to factors such as the US Federal Reserve's interest rate hikes starting in 2022. From February to May last year, the reserves fell below 410 billion dollars, but then increased for six consecutive months. In November, driven by an increase in management income, reserves surpassed 430 billion dollars. However, after market stabilization measures to ease foreign exchange market volatility caused by a sharp rise in exchange rates at the end of the year, reserves declined for the first time in seven months and continued to decrease through January this year.

Last month, among the components of foreign exchange reserves, securities—which include government bonds, corporate bonds, and government agency bonds—increased by 2.44 billion dollars from the end of the previous month to reach 379.96 billion dollars. The share of securities rose to 88.9% of total reserves. In contrast, deposits (7.4%) decreased by 830 million dollars, standing at 22.49 billion dollars (5.3%). Special Drawing Rights (SDR) held with the International Monetary Fund (IMF) amounted to 15.77 billion dollars (3.7%), gold stood at 4.79 billion dollars (1.1%), and the IMF position was 4.61 billion dollars (1.1%).

As of the end of January, South Korea's foreign exchange reserves ranked 10th in the world, down one notch from the previous month.South Korea was the only country among the top 10 whose reserves decreased. The top 10 countries are China, Japan, Switzerland, Russia, India, Germany, Taiwan, Saudi Arabia, and Hong Kong. Some of these countries evaluate their gold holdings at market value, so the methods for assessing foreign exchange reserves differ among countries.

This content was produced with the assistance of AI translation services.