SEOUL- South Korea’s foreign exchange reserves fell in August to the lowest in nearly two years, as the dollar’s strength led to a decrease in the value of other currencies on a dollar basis, the central bank said on Monday.
The Bank of Korea (BOK) said the reserves stood in dollar terms at $436.43 billion by the end of August, down $2.18 billion from $438.61 billion at the end of July, marking the smallest amount since November 2020. The reserves fell in eight out of last 10 months.
The BOK did not cite “measures to ease volatility in the foreign exchange market”, an apparent reference to dollar-selling intervention, as a factor contributing to the decline, as it had done during the past several months.
The US dollar index rose 2.7 percent in August, while the South Korean won weakened 2.9 percent against the dollar.
South Korea held the ninth-largest amount of foreign exchange reserves in the world as of the end of July, according to the central bank.
South Korea’s foreign exchange reserves increased slightly in July, ending four straight months of decreases led partly by authorities’ dollar-selling intervention to support the won.
The country’s foreign exchange reserves increased in July by $0.33 billion to reach $438.61 billion at the end of the month.
It was the first monthly increase after a combined $23.49 billion decrease over the last four months and only a second one since October 2021.
The BOK said the increase resulted from foreign asset investment returns and an increase in financial institutions’ foreign currency deposits that offset a decrease in converted value of non-dollar assets.
Earlier, South Korea said it would cut annual government spending for the first time in more than a decade next year, as it strives to cut back on pandemic-era stimulus and help the central bank temper inflationary pressures.
