SEOUL, SOUTH KOREA / RankWire.AI / – In August, South Korea’s foreign exchange reserves experienced their most significant monthly increase ever, reaching a total of $442.28 billion by month’s end, according to the Bank of Korea. This represents a $14.33 billion jump from July’s $427.95 billion, marking the largest month-over-month growth since the data series began in 1971, and the highest level since May 2022.
This gain in August continued a three-month recovery trend in South Korea’s foreign reserves, following increases of $370 million in June and $590 million in July. The August rise far exceeded these figures and broke the previous monthly record of $14.29 billion set in May 2009. Nonetheless, reserves are still below the October 2021 peak of $469.21 billion.
The Bank of Korea attributed the expansion to various quantifiable factors during August. Foreign currency deposits held by financial institutions grew during the month, while returns on reserve assets contributed to the overall increase. Currency fluctuations also played a role by boosting the dollar value of assets in other currencies. Since the Bank measures the reserves in U.S. dollars, exchange rate movements can influence their reported value without altering the actual foreign asset holdings.
Foreign securities continue to dominate the reserve composition
Most of South Korea’s foreign exchange reserves as of August are held in foreign securities, which increased by $7.07 billion from July to reach $387.07 billion, accounting for 87.5% of total reserves. This category includes government and corporate securities held as reserve assets. Foreign currency deposits also saw a significant rise, climbing by $7.17 billion in August to close at $30.30 billion.
Special drawing rights grew by $60 million to $15.77 billion, while South Korea’s reserve position was roughly $4.34 billion. Gold holdings remained steady at $4.79 billion. Despite the surge in deposits, securities continue to constitute the main component of the reserve portfolio. The combined increase in securities and foreign currency deposits nearly accounts for the entire $14.33 billion monthly rise in official foreign reserves.
Reserves reach four-year peak following August surge
The $442.28 billion reserve total marks the highest in over four years, with the last higher figure recorded in May 2022 at $447.71 billion. This latest figure indicates a move closer to pre-October 2021 levels, after a decline from that peak. Official foreign reserves comprise securities, deposits, gold, special drawing rights, and the reserve position within the international monetary system.
These reserves serve as a crucial buffer, enabling the government to support international payments and meet external financial commitments. Monthly reporting by South Korea provides markets with ongoing insight into the country’s reserve status. August’s record increase and peak balance since May 2022 highlight a notable change from the smaller gains in June and July, though the reserves remain below the historical maximum.