South Korea’s foreign reserves experienced another month of growth in July, thanks to the decline of the US dollar. According to data from the Bank of Korea (BOK), the country’s foreign reserves stood at $421.80 billion by the end of July, showing a $350 million increase compared to the previous month.
The boost in foreign reserves can be tied to the decrease in the value of the US dollar, which led to a rise in the converted value of assets denominated in other currencies. The dollar index, which measures the greenback’s value against major peers, fell 1.7 percent last month, according to the central bank.
Foreign reserves encompass a range of holdings, including securities and deposits in overseas currencies, International Monetary Fund reserve positions, special drawing rights, and gold bullion. In particular, foreign securities like US Treasuries, valued at $376.53 billion by the end of July, experienced an $890 million increase from the previous month. They accounted for 89.3 percent of total foreign reserves.
Deposits, on the other hand, saw a slight decrease of $600 million, amounting to $20.96 billion by the end of July.
South Korea currently ranks as the world’s eighth-largest holder of foreign reserves, according to the BOK’s report from June.
The growth in foreign reserves showcases the positive impact of the falling dollar on South Korea’s economy. As the converted value of holdings in other currencies increases, this boosts the overall value of foreign reserves. Additionally, the rise in investment returns further contributes to the upward trajectory of South Korea’s foreign reserves.
The increase in foreign reserves signifies stability and confidence in South Korea’s economy, as it provides a cushion against any unforeseen external economic shocks. These reserves can be utilized to maintain the country’s financial stability, meet any international obligations, and support its currency, the Korean won.
As the global economic landscape continues to evolve, South Korea’s position as a significant holder of foreign reserves positions the country favorably, offering stability and resilience in times of uncertainty. Through prudent management of these reserves, South Korea can safeguard its economy and ensure continued growth and prosperity in the face of fluctuating international market conditions.
