Foreign cash reserves hit 9-month high

From: JoongAng Daily | Jul. 03, 2009

Korea’s foreign exchange reserves rose to a nine-month high in June as foreign currency liquidity conditions improved and investment profits gained, the central bank said yesterday.

The nation’s foreign reserves totaled $231.73 billion as of the end of June, up $4.96 billion from the previous month, according to the Bank of Korea.

They climbed to the highest level since September last year when the corresponding figure reached $239.67 billion, the BOK added. The FX reserves rose for the fourth straight month in June and they increased by a record $14.29 billion in May.

Foreign reserves consist of securities and deposits in overseas currencies, along with International Monetary Fund reserve positions, special drawing rights and gold bullion.

“The country’s trade surplus has gained and foreign investors continued to snap up local stocks, making foreign currency liquidity conditions improve,” Ha Keun-cheol, an official at the BOK, told reporters.

The BOK said the reserves gained ground on the back of a mixture of favorable factors. The government retrieved about $3 billion in maturing dollar funds that it provided to local banks and the state-run National Pension Service repaid $430 million to the BOK as part of its currency swap arrangement with the central bank matured.

Last year, Korea’s foreign exchange reserves declined for eight straight months before rebounding in December as authorities unloaded dollar holdings to stem the won’s fall and ease the deepening credit squeeze.

Since October, the BOK has provided foreign currency liquidity to cash-strapped banks by tapping foreign exchange reserves or a $30 billion currency swap line with the U.S. Federal Reserve.