South Korea's FX reserves fall $1.72bn in September on US investment funding
In short
South Korea's foreign exchange reserves stood at $440.56bn at the end of September, down $17.2bn from $442.28bn a month earlier, the Bank of Korea said on Oct 6 — the first decline in four months. The central bank cited a fall in financial institutions' foreign-currency deposits, the entrustment of assets to the Korea-US Strategic Investment Corporation and the lower dollar value of assets held in other currencies. The government has already sent the first $2.4bn tranche of its US investment, raised from central bank and Foreign Exchange Stabilization Fund assets.
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South Korea's foreign exchange reserves fell in September, the first decline in four months, the Bank of Korea said on Oct 6. Reserves stood at $440.56bn at the end of September, down $17.2bn from $442.28bn at the end of August, according to the central bank. Business outlets and the national news agency carried the same figures. [ 1 , 2 , 4 , 5 , 6 ]
The central bank attributed the fall to lower foreign-currency deposits at financial institutions, the entrustment of assets to the Korea-US Strategic Investment Corporation and a decrease in the dollar-converted value of assets held in other currencies. The decline followed gains of $370m in June, $590m in July and a record monthly increase of $14.33bn in August, when reserves reached their highest level in four years and three months. [ 1 , 4 , 5 , 6 ]
By asset type, securities such as government and corporate bonds fell $1.05bn to $386.03bn, deposits fell $350m to $29.95bn and Special Drawing Rights fell $290m to $15.48bn. Gold holdings were unchanged at $4.79bn, and the IMF position stood at $4.3bn. [ 1 , 4 , 5 , 6 ]
The government raised the first $2.4bn tranche of its US investment from foreign-currency assets held by the Bank of Korea and the Foreign Exchange Stabilization Fund and recently sent it to the United States, according to the finance ministry and other authorities cited by one outlet. Under the arrangement, the two institutions entrust the money to the Korea-US Strategic Investment Corporation's fund, which transfers it to a US investment vehicle for the Texas Enchinal gas combined-cycle power plant, described as the first US investment project. The central bank said the amount and timing of any further entrustment to the corporation have not been decided. The two governments announced a Korea-US strategic investment project plan covering energy including gas power, nuclear and LNG on Oct 1, according to one report. [ 1 , 4 , 6 ]
Currency moves also weighed on the dollar value of reserves. The dollar index rose 1.7% over the month, from 99.70 to 101.37. Against the dollar, the euro fell 2.1%, the pound 2.3% and the Australian dollar 2.4%; the yen rose, by 1.9% in one report and 1.8% in another, which also said the yen was the only one of the currencies cited to gain. [ 1 , 6 ]
The Bank of Korea again withheld its country-by-country reserve ranking, which it stopped publishing last month, saying it wanted to prevent the “noise” created by excessive significance attached to monthly rank changes, and pointed to its economic statistics system instead. One outlet reported South Korea at 11th as of end-August, behind Hong Kong among others; another reported it at 10th, behind Hong Kong, with China, Japan and Switzerland in the top three. Separately, the central bank reported to the National Assembly that it will begin buying about one tonne of domestically produced export-grade physical gold on Dec 14, with one outlet describing it as a resumption of gold purchases after 13 years. [ 1 , 4 , 5 , 6 ]
Why it matters
The release is the first monthly reserve reading to reflect money moved out for the US investment programme, which the Bank of Korea names as one driver of the decline. For outside readers it shows how the funding of a large bilateral investment commitment is being drawn from official reserves, and the central bank's decision to stop publishing country rankings limits comparisons. The documents give no assessment of the reserve level's adequacy beyond the central bank's explanation.
Key facts
- South Korea's foreign exchange reserves were $440.56bn at the end of September, down $17.2bn from $442.28bn at the end of August, the Bank of Korea said. [ 1 , 2 , 4 , 5 , 6 ]
- The decline was the first in four months, after gains of $370m in June, $590m in July and a record $14.33bn in August. [ 4 , 5 , 6 ]
- The Bank of Korea attributed the fall to lower foreign-currency deposits at financial institutions, asset entrustment to the Korea-US Strategic Investment Corporation and a lower dollar-converted value of assets held in other currencies. [ 1 , 4 , 5 , 6 ]
- Securities fell $1.05bn to $386.03bn, deposits fell $350m to $29.95bn, SDRs fell $290m to $15.48bn and gold holdings were unchanged at $4.79bn, according to the central bank. [ 1 , 4 , 5 , 6 ]
- The government raised the first $2.4bn of US investment from foreign-currency assets held by the Bank of Korea and the Foreign Exchange Stabilization Fund and recently sent it to the United States for the Texas Enchinal gas combined-cycle power plant. [ 4 ]
- The dollar index rose 1.7% during September, from 99.70 to 101.37. [ 1 , 6 ]
- The Bank of Korea has stopped publishing its country-by-country foreign exchange reserve ranking, citing excessive weight given to monthly rank changes. [ 1 , 4 , 5 , 6 ]
- The Bank of Korea reported to the National Assembly that it will begin buying about one tonne of domestically produced export-grade physical gold on Dec 14. [ 5 ]
Confirmed by several sources
- Reserves were $440.56bn at the end of September, down $17.2bn from the previous month. [ 1 , 2 , 4 , 5 , 6 ]
- The Bank of Korea gave the same three explanations: lower foreign-currency deposits at financial institutions, asset entrustment to the Korea-US Strategic Investment Corporation and a lower dollar-converted value of other-currency assets. [ 1 , 4 , 5 , 6 ]
- Securities fell $1.05bn to $386.03bn and deposits fell $350m to $29.95bn. [ 1 , 4 , 5 , 6 ]
- Gold holdings were unchanged at $4.79bn. [ 1 , 4 , 5 ]
- The dollar index rose 1.7% over the month to 101.37. [ 1 , 6 ]
- The central bank withheld its country-by-country reserve ranking again, as it has since last month. [ 1 , 4 , 5 , 6 ]
Still unclear
- South Korea's global reserve ranking: one report places it 11th as of end-August, another places it 10th behind Hong Kong. The two business outlets give different ranks, and the Bank of Korea no longer publishes the ranking, so the positions cannot be reconciled from the documents.
- The change in the yen's value against the dollar in September: 1.9% in one report, 1.8% in another. Two outlets give slightly different figures for the same month.
- How much will be entrusted to the Korea-US Strategic Investment Corporation in future, and when. Only one document carries the central bank official's statement that no amount or schedule has been set.
- A figure of $200bn for US investment appears in one headline. The $200bn amount appears only in a single outlet's headline; the article text attached to that document is about an unrelated parliamentary audit.
What local media are saying
Timeline, local time
- The Bank of Korea announces that foreign exchange reserves stood at $440.56bn at the end of September, down $17.2bn from a month earlier. [ 1 , 2 , 4 , 5 ]
- A further report repeats the figures and notes the Oct 1 announcement of the Korea-US strategic investment project plan covering gas power, nuclear and LNG. [ 6 ]