Finance, Forex and Investments

FX reserves hit record high in April at $279B

Summary: Korea yesterday reported record foreign exchange holdings of $278 8 billion as of the end of April which is likely to intensify a debate about whether the amount is excessive The foreign exchange reserves exceeded the previous record of $273 6 billion in January The monthly growth in holdings up $6 5 billion from March was the largest since last November when it rose by $6 7 billion according to the Bank of Korea The central bank attributed the increase to profits made from its equity investments and interest incurred from bond holdings As our foreign holdings this year were larger our profit naturally grew said Moon Han geun a BOK official Korea last month had the sixth largest foreign exchange reserve after China Japan Russia Taiwan and India Korea has been building up its foreign reserves since the 1997 Asian financial crisis when the reserves fell to $33 2 billion and it had to seek financial assistance from the International Monetary Fund Although Korea had reserves of $240 billion in September 2008 when the global financial crisis erupted it was still considered insufficient in calming local financial markets Critics say the massive accumulation of foreign reserves is still not completely advantageous to Korea since it is suffering losses from its U S dollar holdings as the won appreciates In addition the flow of foreign capital into Korea resulting from its trade surplus is creating inflationary problems To stabilize the monetary situation the central bank will have to issue more monetary stabilization bonds In March the central bank said it had issued 9 6 trillion won worth of these bonds in the largest monthly amount But some analysts believe that Korea needs to accumulate more reserves to protect the country against external factors The growth rate of the foreign reserve is exceptionally fast but it hasn t reached the $300 billion level that we think is the appropriate amount said Chung Seong taek a senior analyst at LG Economic Research Institute The foreign exchange reserve is like insurance Chung Young shik senior analyst at Samsung Economic Research Institute said the foreign exchange reserve is the last ditch defense for Korea s financial position The second half of 2008 and the first quarter of 2009 showed that a foreign exchange reserve of $200 billion was not sufficient for Korea to guard itself against global financial instability said Chung We need to pile up more He said if Korea had not experienced the foreign reserve crisis in 1997 it probably would have kept fewer reserves There are still possibilities that Korea will once again be faced with a global crisis and we need to diversify our defense mechanisms Chung said By Lee Ho jeong ojlee82 joongang co kr Copyrights ⓒ JoongangIlbo Joins com All rights reserved Korea yesterday reported record foreign exchange holdings of $278 8 billion as of the end of April which is likely to intensify a debate about whether the amount is excessive The foreign exchange reserves exceeded the previous record of $273 6 billion in January The monthly growth in holdings up $6 5 billion from March was the largest since last November when it rose by $6 7 billion according to the Bank of Korea The central bank attributed the increase to profits made from its equity investments and interest incurred from bond holdings As our foreign holdings this year were larger our profit naturally grew said Moon Han geun a BOK official Korea last month had the sixth largest foreign exchange reserve after China Japan Russia Taiwan and India Korea has been building up its foreign reserves since the 1997 Asian financial crisis when the reserves fell to $33 2 billion and it had to seek financial assistance from the International Monetary Fund Although Korea had reserves of $240 billion in September 2008 when the global financial crisis erupted it was still considered insufficient in calming local financial markets Critics say the massive accumulation of foreign reserves is still not completely advantageous to Korea since it is suffering losses from its U S dollar holdings as the won appreciates In addition the flow of foreign capital into Korea resulting from its trade surplus is creating inflationary problems To stabilize the monetary situation the central bank will have to issue more monetary stabilization bonds In March the central bank said it had issued 9 6 trillion won worth of these bonds in the largest monthly amount But some analysts believe that Korea needs to accumulate more reserves to protect the country against external factors The growth rate of the foreign reserve is exceptionally fast but it hasn t reached the $300 billion level that we think is the appropriate amount said Chung Seong taek a senior analyst at LG Economic Research Institute The foreign exchange reserve is like insurance Chung Young shik senior analyst at Samsung Economic Research Institute said the foreign exchange reserve is the last ditch defense for Korea s financial position The second half of 2008 and the first quarter of 2009 showed that a foreign exchange reserve of $200 billion was not sufficient for Korea to guard itself against global financial instability said Chung We need to pile up more He said if Korea had not experienced the foreign reserve crisis in 1997 it probably would have kept fewer reserves There are still possibilities that Korea will once again be faced with a global crisis and we need to diversify our defense mechanisms Chung said By Lee Ho jeong ojlee82 joongang co kr Copyrights ⓒ JoongangIlbo Joins com All rights reserved

Image Dimensions: 323 x 472