Foreign reserves at another high
And thanks to growth in the trade account surplus, foreign currency deposits at local banks significantly grew at the end of the third quarter. The currency deposit is expected to further expand as Korea’s exports recently improved, reflecting the continuing recovery in the United States and other advanced economies.
According to the Bank of Korea yesterday, the nation’s foreign reserves last month added $1.8 billion to October’s all-time record to hit a total of $345 billion.
The nation’s foreign reserves have set records for five consecutive months.
“The biggest contributor was profit generated from managing foreign assets,” the central bank said in a statement.
Among the foreign reserves, securities accounted for 90 percent.
Securities last month further expanded after adding $760 million to reach $311.5 billion.
Deposits, which accounted for 6.6 percent of foreign reserves, added $1 billion from the previous month to reach $22.7 billion.
As of the end of October, Korea remained the world’s seventh-largest country by foreign reserve holdings, with China remaining at the top at $3,662.7 billion.
However, when compared to the previous month, foreign reserves growth slightly decelerated. In October, the foreign reserves added $6.3 billion from September.
The biggest reason for the slower growth was the strengthening won.
The currency last month traded between 1,050 won ($0.98) and 1,060 won as foreign investors flocked into the Korean stock market. The won has been at such levels since the second week of October, which was a stark contrast to earlier this year when the won weakened to as low as 1,100.
Meanwhile, foreign currency deposits at local banks grew sharply in the third quarter as Korea’s exports started to recover.
According to the Financial Supervisory Service, foreign currency deposits at the end of September expanded nearly 18 percent in just three months to total $77.4 billion.
“The sharp increase in foreign deposits was largely contributed by the continuous expansion in the trade account surplus,” said an FSS official.
“The recent strengthening of the won also has helped in increasing foreign currency deposits as companies that are sensitive to currency exchange fluctuations usually hold their foreign currencies while hoping it will weaken,” the official added.
Compared to the first nine months of last year, the trade surplus between January and September has grown nearly 68 percent. This has helped local companies increase their foreign currency holdings. Corporate clients are responsible for the biggest share of the foreign currency account at 83.2 percent.
When compared to the end of last year, at the end of September, companies’ foreign currency deposits saw their biggest increase of 14 percent to $64.4 billion.
The households foreign currency account during the same period grew 7 percent to $5.6 billion.
In the third quarter, companies continued to issue foreign currency bonds, which amounted to $3.1 billion. In the first half, companies issued $3.4 billion.
BY LEE HO-JEONG [email@example.com]