S. Korea's FX reserves fall to $212.3 bln in Oct.

SEOUL, Nov. 4 (Yonhap) -- South Korea's foreign exchange reserves took their
steepest monthly fall since the 1997-98 Asian financial crisis in October, mainly
due to an increased liquidity supply meant to ease financial jitters, the central
bank said Tuesday.
The nation's foreign reserves reached US$212.3 billion as of the end of October,
down $27.4 billion from a month earlier, marking the seventh straight month of
decline, the Bank of Korea (BOK) said.
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 the currency swap deals
with the state pension fund, foreign reserves declined as authorities expanded
the dollar supply to the banking sector in a bid to calm jitters sparked by the
global credit crunch," the BOK said. "A stronger U.S. dollar also brought down
the dollar conversion value of assets in other currencies like the euro."
The BOK said foreign exchange authorities supplied more than $20 billion to the
market mainly through swap deals or the state-run Export-Import Bank of Korea
(EXIM) in October, adding that most of the amount was used to repay foreign debts
of local banks.
The fall in the foreign reserve came as South Korea's currency market has been
suffering from a dollar shortage, as banks and companies are scrambling to hoard
the safer greenback on concerns of a financial crisis sparked by the collapse of
investment giant Lehman Brothers Holdings Inc. The won has dipped almost 26
percent to the dollar so far this year.
The government and the BOK unveiled a set of measures to pour in foreign currency
liquidity. The government injected a total of $15 billion through the swap deals
and EXIM. In mid-October, the BOK adopted an open bidding system for won-dollar
swaps, pumping in $2.7 billion last month.
As of the end of September, 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 $995.9 billion and Russia with $556.1
billion. India held the world's fourth-largest reserves with $286.3 billion,
followed by Taiwan with $281.1 billion.
The BOK said authorities' possible liquidity injection down the road may not be
as large as October's because tightened overseas borrowing conditions are
expected to ease, and the country's current account balance is likely to swing to
the black in coming months.
sooyeon@yna.co.kr
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