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Korea’s foreign reserves edged up in December in their first rebound in three months, mitigating earlier concerns that recent market interventions by financial authorities to curb the won’s rapid devaluation had depleted the country’s policy tools.
 
The forex stockpile rose by $208 million to $415.6 billion between the end of November and the end of December in its first upturn since October, according to a monthly report the Bank of Korea released Monday. The year-end figure still marked Korea’s lowest since the $408.83 billion reported in 2019.
 
 
Despite earlier concerns over intervention measures possibly depleting the country’s foreign reserves, which were the world’s ninth-largest as of the end of November, investment gains and a year-end surge in foreign deposits by banks drove the recent rise. But pressure on the won remains, with the currency having closed 2024 at a 15-year low.
 

 
“Despite the strengthening of the dollar reducing other currencies’ dollar-conversed value and the implementation of volatility mitigation measures, financial institutions increasing their foreign deposits during the year-end period and an increase in investment gains mainly drove the foreign reserves,” said the central bank in the report.
 
Banks typically increase foreign deposits by the end of each quarter to improve their Bank for International Settlements capital adequacy ratios. The resulting increase in foreign deposits, coupled with realized gains from securities investments by the central bank’s foreign exchange reserve management group, offset the reduction, according to the bank’s explanation.
 
Bank of Korea Gov. Rhee Chang-yong had previously stated that financial authorities were intervening to mitigate the recent sharp deprecation in “smoothing operations,” but said that foreign exchange reserves remained robust.
 
“There have been smoothing operations taking place to mitigate a volatility surge following the martial law declaration,” said Rhee on Dec. 18, adding, “Some have been raising questions on whether foreign reserves would dip below the $400 billion or the $410 billion mark, but it is not likely.”
 
Securities, including government bonds and debentures, accounted for $366.7 billion, or 88.2 percent, of the forex stockpile, down $5.7 billion from a month prior. Deposits accounted for $25.2 billion, or 6.1 percent, a $6.1 billion increase from the end of November. Special drawing rights, or SDRs, amounted to $14.7 billion, gold $4.8 billion and IMF position $4.2 billion.
 
With the won remaining persistently weak against the dollar, the possibility of further depletion still lingers, especially with the year-end increase in deposits expected to taper off by January.
 
The won-dollar exchange rate soared 77.8 won, or 5.6 percent, throughout December, and closed the year’s final regular trading at 1,472.5 won against the greenback. This marked the weakest closing rate since March 13, 2009, and also the weakest year-end rate since 1997, when the Asian financial crisis pushed the won-dollar exchange rate to 1,695 by the end of the year. The won continued to hover well above the 1,460 per dollar threshold into the new year, closing at 1,469.70 on Monday, up 1.3 won from the previous session.

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BY SHIN HA-NEE [[email protected]]