South Korea's foreign exchange reserves surpassed the US$300 billion mark for the first time in April as a weaker U.S. dollar boosted the conversion value of assets in other currencies, the central bank said Tuesday.
The country's foreign reserves reached a record $307.2 billion as of the end of April, up $8.58 billion from March, according to the Bank of Korea (BOK).
The reserves exceeded the $300 billion level for the first time in April after it rose to above the $200 billion mark in February 2005, it added.
Foreign reserves have been on the rise as dollar inflows have increased amid robust exports and foreign investors' sustained buying of Korean assets.
Foreign reserves consist of securities and deposits denominated in overseas currencies, along with International Monetary Fund (IMF) reserve positions, special drawing rights and gold bullion.
"The reserves gained ground last month as investment profits rose and gains in the euro and the British pound sharply increased the dollar conversion value," said Shin Jae-hyuk, an economist at the BOK.
Shin declined to comment on an appropriate size of the foreign reserves, but added that the reserves tend to be on the rise in accordance with the economic growth.
"Whether the reserve will rise would depend on how much non-dollar assets appreciate to the dollar."
In April, the euro rose 4.5 percent to the greenback and the pound gained 4.2 percent to the dollar. The Japanese yen appreciated 2.6 percent per the dollar.
Many emerging countries have been accumulating large volumes of foreign exchange reserves as a form of "self-insurance" in a bid to deal with abrupt foreign capital outflows, sparking controversy over an appropriate size of the foreign reserves.
South Korea's foreign reserves have risen after tumbling to $200.5 billion in November 2008 when the country was in the midst of the global financial turmoil.
In the height of the financial crisis, South Korea unloaded part of their dollar holdings to stem the local currency's sharp falls and ease the deepened credit squeeze. The country provided foreign currency liquidity to cash-strapped banks by tapping foreign exchange reserves or a $30 billion currency swap line with the U.S. Federal Reserve.
As of the end of March, South Korea was the world's seventh-largest holder of foreign exchange reserves after China, Japan, Russia, Taiwan, Brazil and India.
Source; Yonhap News (May 3, 2011)