Synopsis
As South Korea's foreign reserves hit their lowest point in nearly five years, the local currency's weakness is a significant factor. The reserves dropped to $411.01 billion by January's end, with notable declines linked to market volatility and political unrest.Key Takeaways
- South Korea's foreign reserves reached $411.01 billion at the end of January.
- This is the lowest level since June 2020.
- The local currency fell below 1,460 won against the U.S. dollar.
- Foreign securities accounted for 88.1% of reserves.
- Concerns remain over inflation and global commodity prices.
Seoul, Feb 5 (NationPress) The foreign reserves of South Korea have dropped from the previous month, reaching their lowest point in almost five years due to a weakened local currency, as revealed by central bank data on Wednesday.
As of the end of January, the country’s foreign reserves stood at $411.01 billion, a decrease of $4.59 billion from the prior month, according to figures from the Bank of Korea (BOK), as reported by Yonhap news agency.
This marks the lowest level since June 2020, when reserves were at $410.7 billion, and January's figures indicate the most significant drop since April 2024.
The decline is linked to actions taken by financial authorities in response to fluctuations in the foreign exchange market.
The local currency hit its lowest point in nearly 16 years, falling below 1,460 won against the U.S. dollar in December, a trend that persisted throughout January amid domestic political turmoil stemming from President Yoon Suk Yeol’s martial law declaration and the ongoing strength of the dollar.
As of the end of January, foreign securities, including U.S. Treasuries, were valued at $362.02 billion, down $4.65 billion from the preceding month, making up 88.1 percent of total foreign reserves.
In contrast, the value of deposits increased by $70 million, reaching $25.29 billion at the end of the previous month.
Foreign reserves encompass securities and deposits in foreign currencies, positions with the International Monetary Fund, special drawing rights, and gold bullion.
As of the end of January, South Korea is the ninth-largest holder of foreign reserves globally.
According to the data, China ranks first, followed by Japan, Switzerland, India, and Russia.
Additionally, the South Korean central bank has expressed concerns over ongoing uncertainties regarding global oil and agricultural prices, the local currency, and domestic demand, which may have future implications for inflation.
BOK Deputy Governor Kim Woong made this evaluation during a meeting focused on price monitoring after government data indicated that consumer prices, a critical inflation indicator, increased by the largest margin in six months, at 2.2 percent year-on-year in January.
In its latest forecast released in November, the BOK anticipates a 1.9 percent year-on-year growth in 2025.