By Yoon Ja-young
Staff Reporter
The country's foreign exchange reserves are expected to have a record-breaking month as a weakening dollar has boosted the value of assets in other currencies.
According to the Bank of Korea (BOK), the country held $264.2 billion in its reserves as of the end of October, up $9.9 billion from the previous month. The reserves have been rising for eight consecutive months, with a total gain of $62.7 billion.
The central bank said that the strengthening of the euro and the pound increased the value of the reserves in dollar terms.
A partial recovery of the foreign exchange liquidity fund and the maturity of a currency swap also fattened the dollar reserves. Moreover, the central bank is estimated to have been buying dollars in the market to stop the Korean won from further strengthening as concerns have been growing that strong Korean currency could hurt the country's exporters.
The BOK estimates that the reserves will hit a record high at the end of this month. ``Since the investment return pulls up the reserves, they are expected to hit a record high this month unless the euro turns exceptionally weak,'' an official at the bank said.
Moreover, exports are expected to be favorable. ``We expect exports will start registering positive year-on-year growth from next month on, due to growing low base effects,'' Sharon Lam, vice president of Morgan Stanley Asia Research, said in a report.
``Exports are expected to continue rising due to the economic recovery of our major trade partners,'' KTB Securities economist Kim Yu-mi said.
``The recent strengthening of the Korean currency is burdensome for exporters, but it is still undervalued relative to the currencies of its major export competitors, when compared with September last year when the global financial crisis broke out. Compared with the Japanese yen, the Korean won is still undervalued by 15 percent from last September,'' she said, adding that the country's exporters still have competitiveness in prices.
As of September, Korea boasts the sixth-largest foreign exchange reserve in the world. China has the largest, totaling $2.2 trillion, followed by Japan with $1.1 trillion, Russia, Taiwan and India.
chizpizza@koreatimes.co.kr
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