Weak dollar keeps reserves on record pace

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Weak dollar keeps reserves on record pace

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Foreign reserves increased $5.07 billion to reach $360.9 billion in May, setting a record high for the 11th consecutive month, the Bank of Korea reported yesterday.

The central bank said the increase reflects growing profits in management of foreign currency assets with the U.S. dollar depreciating against most major currencies.

The dollar in May weakened 1.5 percent against the euro and 0.6 percent against the pound sterling. As a result, dollar-denominated securities that represent 92 percent of Korea’s foreign reserves added $4.1 billion from April to $330.1 billion.

Deposits, which account for the second-largest share of foreign reserves, gained $1.1 billion to $20 billion.

Special drawing rights, which are supplementary foreign reserve assets, shrank slightly from $3.51 billion in April to $3.49 billion, while the IMF position slipped from $2.51 billion to $2.44 billion. Gold was unchanged at $4.8 billion.

An earlier report by Hyundai Research Institute, however, claimed that based on the Bank for International Settlement (BIS) standard, Korea still falls short when it comes to foreign reserves.

The research institute estimated that the appropriate amount would be $38 billion when factoring in the three-month average in trade expenses and foreign bonds that are scheduled to mature within a year.

When adding in foreign investment capital that could be withdrawn abruptly in the event of a crisis, the report said, foreign reserves should be at $546.5 billion. The research institute estimated 33 percent of local stocks and bonds could be sold off.

As of April, Korea had the world’s seventh-largest foreign reserves. China still holds the top spot with more than $3.9 trillion in March, followed by Japan at $1.28 billion. Experts speculate China’s foreign reserves now exceed $4 trillion.

BY LEE HO-JEONG [ojlee82@joongang.co.kr]



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