South Korea's foreign exchange reserves increased in February for the first time in three months. The rebound came despite the foreign exchange authorities' dollar-selling interventions to defend the won, driven largely by the government's issuance of dollar-denominated bonds, according to analysis.
The Bank of Korea (BOK) announced Friday that the country's foreign exchange reserves stood at $427.62 billion as of the end of February, up $1.72 billion from the previous month.
The won-dollar exchange rate surged at the end of last year, prompting the foreign exchange authorities to intervene by selling dollars. This led to two consecutive months of declining reserves in December and January before the reversal in February.
"Despite market stabilization measures such as the currency swap with the National Pension Service and a decline in the dollar-converted value of other currency assets, reserves increased due to the fresh issuance of dollar-denominated Foreign Exchange Stabilization Fund Bonds and investment income," a BOK official explained.
The government issued $3 billion worth of dollar-denominated Foreign Exchange Stabilization Fund Bonds in early February, comprising $1 billion in three-year notes and $2 billion in five-year notes. These bonds serve to secure dollars that can be released into the market to ease upward pressure on the exchange rate during periods of sharp currency depreciation.
By asset type, securities including government and corporate bonds rose $2.44 billion to $379.96 billion. Deposits fell $830 million to $22.49 billion, while International Monetary Fund (IMF) Special Drawing Rights (SDR) declined $110 million to $15.77 billion. Gold holdings remained unchanged at $4.79 billion from the previous month, as gold is valued at the purchase price rather than the current market price.
South Korea's foreign exchange reserves ranked 10th globally as of the end of January at $425.9 billion, slipping one spot from ninth the previous month as Hong Kong moved ahead. China held the largest reserves at $3.3991 trillion.
