Korea Back to Net Creditor Country
By Kim Jae-kyoung
Staff Reporter
South Korea appears to have returned to being a net creditor country in September, with the nation's foreign exchange reserves rising for the seventh straight month.
The central bank expects the reserves to continue on an upward trend and breach the previous record level by the end of the year.
The Bank of Korea (BOK) reported Tuesday that currency reserves reached $254.25 billion at the end of September, up $8.79 billion from a month ago, and the highest level since June last year.
This also marks the biggest monthly gain since a $14.3 billion jump in May. The reserves consist of securities and deposits denominated in overseas currencies, along with International Monetary Fund reserve positions, special drawing rights and gold bullion.
The increase was mainly due to a weaker U.S. dollar, which boosted the dollar value of assets in other currencies, as well as a rise in profits from investments.
"It is too early to come to a conclusion but considering the supply-demand of foreign liquidity, it appears that the country became a net creditor country again in September," BOK economist Moon Han-geun said.
In the wake of the global financial crisis, the country turned into a net debtor country in September 2008 for the first time in eight years. In June, the net external liabilities narrowed to $7.6 billion from $24.1 billion in March.
But given that foreign reserves have been on an upward trend and the current account has remained in the black since June, chances are that the net external position has swung into positive territory. The reserves increased $5.8 billion in July, $8 billion in August and $8.8 billion in September.
The government retrieved about $1.5 billion in maturing dollar funds that it provided to local banks, and the state-run National Pension Service repaid $640 million to the BOK as part of its currency swap arrangement with the central bank.
The continued rise in the reserves comes as the local currency has been appreciating against the dollar. The won has gained about 34 percent against the dollar since March.
In August, South Korea was the world's sixth-largest holder of foreign exchange reserves after China, Japan, Russia, Taiwan and India.