"US Investment and Other Factors" Korea's Foreign Exchange Reserves Drop by USD 1.72 Billion in September

USD 440.56 Billion in Reserves at the End of September, Down USD 1.72 Billion from Previous Month

Decline Attributed to Reduction in Financial Institutions' Foreign Currency Deposits and Asset Entrustment to Korea-US Strategic Investment Corporatio

Last month, South Korea's foreign exchange reserves decreased for the first time in four months. After posting a record increase in the previous month, the reserves dropped by approximately USD 1.7 billion compared to August. This change was primarily due to declines in foreign currency deposits held by financial institutions and asset entrustments to the Korea-U.S. Strategic Investment Corporation.

An employee is sorting US dollar bills at the Hana Bank Counterfeit Response Center in Jung-gu, Seoul. Photo by Yonhap News.

According to the Bank of Korea on October 6, as of the end of September 2026, South Korea's foreign exchange reserves stood at USD 440.56 billion, a decrease of USD 1.72 billion from the end of the previous month (USD 442.28 billion). Despite earnings from reserve operations, several factors contributed to the decline: a reduction in foreign currency deposits held by financial institutions, asset entrustment to the Korea-U.S. Strategic Investment Corporation, and a decrease in the U.S. dollar conversion value of foreign currency assets held in other currencies.

The government recently allocated the first USD 2.4 billion in U.S.-bound investment using foreign exchange assets held by the Bank of Korea and the Foreign Exchange Equalization Fund. A Bank of Korea official stated, "The amount and timing for any additional entrusted assets to the Korea-U.S. Strategic Investment Corporation have not yet been determined."

Breaking down the reserves by asset type, marketable securities—which include government bonds, corporate bonds, and government agency bonds—dropped by USD 1.05 billion to USD 386.03 billion compared with the previous month. Securities accounted for 87.6% of total reserves. Deposits (6.8% share) decreased by USD 350 million to USD 29.95 billion. Special Drawing Rights (SDR) from the International Monetary Fund (IMF) amounted to USD 15.48 billion (3.5%), gold to USD 4.79 billion (1.1%), and the IMF position to USD 4.3 billion (1.0%).

Meanwhile, the volume of physical gold held by the Bank of Korea, which has remained unchanged at 104.4 tons since 2013, is expected to increase by about 1 ton by the end of this year. Once the domestic trading system for locally produced gold is established by December 14, the central bank plans to clarify the specifics regarding the timing and scale of purchases.

The Dollar Index (DXY), which measures the value of the U.S. dollar against the currencies of six major countries, rose from 99.70 at the end of August to 101.37 at the end of September, marking a 1.7% increase over the month. Compared to the dollar, the Japanese yen appreciated by 1.9%, while the euro (-2.1%), British pound (-2.3%), and Australian dollar (-2.4%) all declined.

As of the end of August, South Korea ranked 11th in the world in terms of foreign exchange reserves. According to the Bank of Korea's Economic Statistics System (ECOS), South Korea held more reserves than most countries, following China, Japan, Switzerland, Russia, India, Taiwan, Germany, Saudi Arabia, Italy, and Hong Kong.

The Bank of Korea stated, "Monthly changes in ranking are not a sufficient indicator of reserve soundness, and excessive focus on rankings can lead to unnecessary noise." Therefore, since last month, the central bank has stopped publishing country-specific rankings of foreign exchange reserves and instead, is disclosing each country's monthly reserve levels through ECOS.

This content was produced with the assistance of AI translation services.