S. Koreas Foreign Exchange Reserves Fall to $200.5 Billion

South Korea's foreign exchange reserves continued to fall in November due largely to liquidity injections meant to ease an ongoing credit crunch and financial jitters, Yonhap News reported quoting the central Bank of Korea.

The nation's foreign reserves totaled $200.51 billion as of the end of November, down $11.74 billion from a month ago, when they stood at $212.25 billion, marking the eighth straight month of decline, according to the Bank of Korea.

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

"Despite higher investment profits and an early end of currency swap deals with the state pension fund, foreign reserves declined as authorities injected more dollars into the banking sector in a bid to calm jitters sparked by the global credit crunch," the central bank was quoted as saying.

"A stronger U.S. dollar also brought down the dollar conversion value of assets in other currencies like the pound."

The fall in the foreign reserve came as South Korea's currency market has been suffering from a dollar shortage, prompting companies to hoard the safer greenback on concerns of a financial crisis sparked by the collapse of investment giant Lehman Brothers Holdings Inc. in September.

The won has dipped almost 38 percent to the dollar so far this year.

The BOK said it supplied around $7.5 billion to the market mainly through swap deals in November. In October and November, the bank supplied around $10.2 billion to the market.

The government also supplied $6.7 billion to the market through the state-run Export-Import Bank of Korea last month, according to the central bank.

As of the end of October, South Korea was the world's sixth-largest holder of foreign exchange reserves. China held the world's largest foreign reserves, worth $1.9 trillion, followed by Japan with $977.7 billion and Russia with $484.6 billion. Taiwan held the world's fourth-largest reserves with $278.2 billion, followed by India with $252.9 billion.

Meanwhile, a South Korean official said the country's foreign reserves will not likely fall below $200 billion as more dollars are expected to flow into the country down the road.

"I expect that things will improve down the road, given demand and supply conditions of dollars," Vice Finance Minister Kim Dong-soo told a local radio program. Asked whether the reserves will be kept above the $200 billion level, Kim said, "I think so."