BlockBeats report: On September 3, South Korea’s foreign exchange reserves increased by $14.33 billion in August, marking the largest monthly increase on record, primarily driven by a significant rise in foreign currency deposits held by commercial banks at the Bank of Korea.
On Thursday, the Bank of Korea stated in a statement that, as of the end of August, South Korea’s foreign exchange reserves rose to $442.28 billion from $427.95 billion at the end of July. The central bank attributed the August increase primarily to a sharp rise in foreign currency deposits by financial institutions, as well as gains from investment returns and valuation gains on overseas assets denominated in foreign currencies, driven by a weakening U.S. dollar against other currencies. The improvement in foreign exchange reserves has strengthened South Korea’s financial buffer, especially after the won weakened several times during the first half of the year, drawing market attention to the country’s external financing conditions.
Earlier this year, the Korean won fell to its lowest level since 2009, prompting Korean authorities to issue multiple warnings about excessive exchange rate volatility while seeking to curb capital outflows caused by retail investors heavily investing in overseas assets.