Foreign reserves dip but BOK says not to worry

An employee sorts out dollars at Hana Bank's Counterfeit Notes Response Center in Jung District, central Seoul, on Tuesday. [YONHAP]

Korea’s foreign reserves fell for the second month in a row in September.

The Bank of Korea said foreign reserves fell to $416.8 billion as of the end of last month from $436.4 billion a month earlier.

Despite the fall, Korea’s rank in terms of foreign reserves rose to eighth largest in the world from ninth.

It was the largest monthly reduction fall after that of October 2008.

Foreign reserves consist of securities, deposits, special drawing rights, gold and the country’s IMF reserve positions.

The Bank of Korea said Korea’s foreign reserves are enough.

“Our international assets account for 37 percent of our GDP,” said Oh Kum-hwa, Director General of International Department at the Bank of Korea, in a press event Wednesday. "If foreign reserves are accumulated with a purpose of buffering external shocks, we believe the amount is enough.”

Oh added the bank recently intervened in the foreign exchange market to slow its volatility, as a weak won led importers to pull forward their purchases of dollars and exporters to delay sales of dollars.

The Bank of Korea and Finance Ministry net sold $15.49 billion in the second quarter to stabilize the falling won, central bank data showed last Friday.

That was the largest net selling since the Bank of Korea and the finance ministry started releasing quarterly data on their dollar trading in the third quarter of 2019 to boost the transparency of their market stabilization measures.

The authorities net sold $8.31 billion in the first quarter.

The won has been falling against the dollar this year as central banks around the world raise interest rates to tame inflation.

“Foreign reserves are saved up to be used at times of market volatility as in recent times,” Oh added. "The Bank of Korea and the government will strengthen market monitoring and continuously work to stabilize it."

The won has fallen around 19 percent this year, reaching above 1,440 won for the first time since March 2009. It traded at 1,410.10 won to the dollar when the market closed Wednesday.

BY JIN MIN-JI [jin.minji@joongang.co.kr]