Foreign reserves continue to shrink in Oct. as authorities support local currency

SEOUL, Nov. 3 (Yonhap) -- South Korea's foreign reserves continued to shrink in October as authorities unloaded dollars to support the weakening local currency, central bank data showed Thursday.

The country's foreign reserves had stood at US$414.01 billion as of end-October, down $2.76 billion from the previous month, according to the data provided by the Bank of Korea (BOK).

The decline, however, was much smaller than September, when the foreign reserves contracted $19.66 billion, the largest on-month decline in about 14 years.

Foreign reserves consist of securities and deposits denominated in overseas currencies, International Monetary Fund reserve positions, special drawing rights and gold bullion.

South Korea has seen its foreign reserves shrink, as it is striving to defend the won from excessively sliding against the dollar, whose value has been rising sharply amid the U.S.'s aggressive monetary tightening.

The BOK said October's decline is due in part to "volatility-reducing steps" for the FX market, apparently referring to dollar selling. It did not provide data on how much it unloaded last month.

The BOK also cited as reasons for the shrinkage a recently opened dollar-for-won currency swap line with the National Pension Service (NPS) that allows the state pension fund to borrow dollars needed for its overseas investment from the central bank.

The currency swap deal is intended to ease demand for dollars on the spot currency market. The BOK did not disclose details on dollar borrowing by the NPS.

Of the total reserves, foreign securities, such as U.S. Treasuries, had been valued at $362.35 billion as of end-October, down $17.06 billion from the previous month. It accounted for 87.5 percent of total foreign reserves, the data showed.

The value of deposits also decreased $14.1 billion on-month to $28.29 billion, which made up 6.8 percent of the total.

South Korea had been ranked the world's ninth-largest holder of foreign reserves as of the end of September, the BOK said.

kokobj@yna.co.kr
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