South Korea's foreign exchange reserves increased for the second consecutive month in July, driven by the issuance of foreign exchange stabilization bonds and a rise in the US-dollar-denominated value of non-dollar assets, the Bank of Korea (BOK) reported Wednesday. The back-to-back gains mark a partial recovery after reserves had trended lower through much of late 2023 and early 2024.

Total reserves reached $427.95 billion as of the end of July, a gain of $590 million from the previous month, according to central bank data. The July increase followed a $370 million month-on-month rise recorded in June.

The BOK attributed the growth primarily to the issuance of foreign exchange stabilization bonds — a monetary policy instrument used by the Korean government to help manage the value of the won and maintain orderly conditions in the foreign exchange market — as well as an increase in the dollar-valued worth of foreign currency deposits amid ongoing market stabilization measures. For an export-driven economy such as South Korea's, adequate reserves serve as a critical buffer against external shocks, support sovereign creditworthiness, and provide the BOK with capacity to intervene in currency markets during periods of volatility in the won.

Breakdown of Reserve Components

Foreign securities, which include US Treasuries and other sovereign debt instruments, declined by $340 million from a month earlier to $380.01 billion at the end of July. Despite the decrease, securities remained the dominant component of the reserve portfolio, accounting for 88.8 percent of total holdings.

Foreign currency deposits posted the largest component-level gain, rising $860 million to $23.13 billion. Special drawing rights (SDRs) — international reserve assets created by the International Monetary Fund (IMF) to supplement member countries' official reserves — increased by $60 million to $15.7 billion.

Gold bullion holdings remained unchanged at $4.79 billion. South Korea's reserve position with the IMF, which represents the country's financial stake in the Fund, rose by $10 million to $4.32 billion at the end of July.

Global Ranking

South Korea ranked as the world's 10th-largest holder of foreign exchange reserves as of the end of June, moving up from 13th place a month earlier. China remained the largest reserve holder globally, followed by Japan, Switzerland, Russia, and India, according to the BOK.

(Yonhap)