SEOUL, SOUTH KOREA / RankWire.AI / – In August, South Korea’s foreign exchange reserves experienced their largest monthly growth ever, according to the Bank of Korea. The reserves reached $442.28 billion by the end of August, marking a $14.33 billion increase from $427.95 billion at the close of July. This rise was the biggest since the reserve data series started in 1971. It also pushed the total to its highest point since May 2022.
This August boost continued a three-month recovery trend in South Korea’s foreign reserves. The reserves grew by $370 million in June and by $590 million in July. The August increase exceeded these figures and broke the previous record monthly increase of $14.29 billion set in May 2009. Despite this significant rise, reserves still lag behind the record $469.21 billion reported in October 2021.
The central bank attributed the growth to various factors during August. Foreign currency deposits held by financial institutions grew during the month. Reserve asset management returns also contributed to the total. Currency fluctuations increased the dollar value of assets in other currencies. Since the Bank of Korea measures reserve holdings in U.S. dollars, exchange rate shifts can change their reported value without affecting the actual foreign assets.
Foreign securities remain the main component of reserves
At the end of August, foreign securities made up most of South Korea’s foreign exchange reserves. Their value increased by $7.07 billion from July to $387.07 billion. This accounted for 87.5% of the total reserve holdings. This category includes government and corporate securities kept as reserve assets. Foreign currency deposits also saw a large jump. These deposits rose by $7.17 billion during August, reaching $30.30 billion by month’s end.
Special drawing rights increased by $60 million, totaling $15.77 billion in August. South Korea’s reserve position stood at about $4.34 billion, with gold holdings unchanged at $4.79 billion. Despite the surge in deposits, securities continued to dominate the reserve portfolio. The combined growth of securities and foreign currency deposits made up almost the entire $14.33 billion monthly increase in the country’s official foreign reserves.
Reserves hit four-year high with August’s gain
The reserve total of $442.28 billion marked the highest level in over four years. The last time South Korea reported a higher figure was in May 2022, when reserves stood at $447.71 billion. These latest figures bring the reserves closer to the pre-decline levels following the October 2021 peak. Official foreign reserves include securities, deposits, gold, special drawing rights, and the country’s reserve position within the international monetary system.
Foreign exchange reserves serve as official assets in foreign currency, supporting international payments and external financial commitments. South Korea reports these figures each month to give markets a regular insight into the country’s reserve status. August’s record increase and highest balance since May 2022 mark a significant shift from the smaller gains seen in June and July. The total, however, remains below South Korea’s historical peak.