S. Korea's financial stability improves with foreign exchange reserve hitting landmark $400 bil.

6월 외환 보유액 사상 최초 4천억 달러 돌파

Korea's economic growth has been slowing down in recent months..... with a sudden drop in exports.
But we do find some solace in foreign exchange reserves hitting a landmark figure.
Oh Soo-young explains further.
South Korea's foreign exchange reserves topped 400 billion dollars for the first time in June,... bolstering the country's financial stability.
The Bank of Korea said Wednesday the country's reserves grew one-point-three billion dollars from the previous month,... to 400-point-three billion dollars.
The record-breaking figure comes more than seven years after the country's foreign reserves surpassed the 300 billion dollar threshold in 2011. Korea had reserves of just four billion dollars back in 1997 during the Asian Financial Crisis.
A bank official said the recent surge was largely due to a steady current account surplus,... and also cited constant gains in assets held in foreign currencies.
Securities holdings alone reached 367 billion dollars -- up by one-point-five-six billion dollars on-month.

"Amid concerns of a downturn in exports, consumption and investment,... experts say the country's burgeoning foreign reserves are an encouraging sign of financial resilience,... as they translate to a growing ability to service foreign debt."

South Korea's short-term external debt in 1997 was roughly three times its foreign exchange reserves.
The ratio came to 75 percent during the global financial crisis,... and fell to just 30-point-four percent in March this year.

"We have more than enough foreign reserves to pay back short term debt should they want their dollars back. If the investors have confidence that Korea has enough dollars to pay them back, paradoxically, they're less likely to ask for their money back."

However, the expert says the country shouldn't grow complacent, but rather work to maintain the right balance of foreign reserves in the vault.

"There's sort of an ideal level to guard against currency crisis but not excessivereserves so that the government has enough money to make welfare payments, infrastructure and so on... Having a lot of foreign currency reserves does make the Korean government more vulnerable to changes in exchange rates. When the dollar strengthens, it's good for the BOK because their assets go up but if the dollar weakens then it's bad for BOK as the value of their assets go down..."

Some experts are also concerned that there may be limits to increasing foreign currency holdings,... when Korea begins disclosing its market intervention records next year, following pressure from the U.S. and IMF, so as to avoid being labeled as a currency manipulator.
Oh Soo-young, Arirang News.

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