The foreign exchange reserves of our country, which had been decreasing for two consecutive months, turned to an increase last month. This was because commercial banks deposited dollars with the Bank of Korea to meet the quarter-end Bank for International Settlements (BIS) ratio. The increase in foreign currency asset management revenue also contributed to the increase in foreign exchange reserves.
According to the 'foreign exchange reserves at the end of March 2025' announced by the Bank of Korea on the 2nd, the foreign exchange reserves at the end of last month amounted to $409.66 billion, an increase of $450 million compared to the end of the previous month. This increase in foreign exchange reserves is the first in three months since December of last year (+$210 million; $415.6 billion).
The Bank of Korea noted that the increase in foreign currency deposits by financial institutions was a cause of the decrease in foreign exchange reserves last month. At the end of the quarter, commercial banks tend to deposit foreign currency with the Bank of Korea to meet the Bank for International Settlements (BIS) ratio, which increases foreign exchange reserves. The depreciation of the U.S. dollar also contributed to the increase in the dollar value of other foreign currency assets held by the Bank of Korea. According to the Bank of Korea, in March, the dollar index (DXY), which indicates the value of the dollar against the currencies of the six major countries, fell by about 3%.
However, due to the won-dollar exchange rate fluctuating above 1,470 won, the increase in foreign exchange reserves was limited as the National Pension Service and foreign exchange authorities increased their foreign exchange transaction activities. The foreign exchange authorities have made a $65 billion foreign exchange swap agreement with the National Pension Service, meaning that if the National Pension Service uses it, the foreign exchange reserves will decrease. Transactions with the National Pension Service are carried out by the foreign exchange authorities receiving won from the National Pension Service and providing dollars.
The securities that account for most of the foreign exchange reserves, including U.S. government bonds and agency bonds, as well as corporate bonds, increased by $4.15 billion to $361.53 billion, compared to the previous month ($357.38 billion). Deposits decreased by $3.84 billion to $24.17 billion. Special drawing rights increased by $140 million to $14.98 billion compared to the previous month. The International Monetary Fund (IMF) position and gold remained the same as the previous month at $4.19 billion and $4.79 billion, respectively.
As of the end of February, South Korea's foreign exchange reserves, which can be compared with those of other major countries, stood at $409.2 billion, ranking 9th in the world. China ranked first with $322.72 billion, followed by Japan ($125.33 billion), Switzerland ($92.38 billion), India ($63.87 billion), and Russia ($63.24 billion).