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Korea's Foreign Reserves Dip to US$201.5 Bil.
Foreign exchange reserves

South Korea's foreign exchange reserves inched down in February due to a stronger U.S. dollar, but managed to stay above the psychologically important US$200 billion mark.

The nation's foreign reserves totaled $201.54 billion as of the end of February, down $200 million from a month earlier, the Bank of Korea (BOK) said in a statement on Mach 3..

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

Last year, South Korea's foreign exchange reserves declined for the eighth straight month before rebounding in December as authorities unloaded part of their dollar holdings to stem the won's fall and ease the deepening credit squeeze.

"A fall in the reserve in February came mainly because a stronger U.S. dollar brought down the dollar conversion value of assets in other currencies like the yen," said Ha Keun-cheol, an official at the BOK. "Meanwhile, local banks paid back part of maturing dollar funds provided by foreign exchange authorities."

Last month, local banks repaid a combined $2.2 billion out of dollar liquidity, which authorities offered to the local swap market, according to the BOK.

The data comes as the local foreign exchange market has been gripped by fears that a possible capital flight by Japanese financial firms may trigger another financial crisis in March, leaving local banks unable to pay back debts amid a dollar shortage. The speculation has been widely shrugged off by the government and the BOK.

"Compared with October, local banks are receiving less pressure to service their debt recently," Ha added.

South Korean banks, saddled with high overseas short-term borrowing, have been suffering from dollar shortages, sparked by the collapse of the U.S. investment bank Lehman Brothers Holdings Inc. in mid-September.

The finance ministry said Friday that foreign debt owned by local banks and foreign branches reached $92.6 billion as of the end of January, and $38.3 billion in overseas debt will mature this year. The authorities have said the amount is manageable given the country's foreign reserves.

On Oct. 30, the BOK announced a $30 billion currency swap agreement with the U.S. Federal Reserve, tapping $16.35 billion from the swap line so far.

The use of the swap facility helped ease fears about declining foreign reserves. The Korean currency fell 25.7 percent to the dollar last year alone, becoming one of the world's worst-performing currencies.

As of the end of January, South Korea was the world's sixth-largest holder of foreign exchange reserves after China, Japan, Russia, Taiwan and India.




 

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