Foreign Reserves May Climb to $270 Bil.

By Kim Jae-kyoung
Staff Reporter

The nation's foreign exchange reserves are expected to reach up to $270 billion this year on the back of the large current account surplus and the won's appreciation against the U.S. dollar, according to analysts and policymakers.

The reserves reached a nine-month high of $231.7 billion in June, the biggest since last September when they stood at $239.7 billion. The reserves rose for the fourth straight month in June and were up $30 billion from $217.4 billion in January.

In its latest report, ING Group said that the Bank of Korea (BOK) will use the Korean won appreciation pressure to accelerate the restoration of foreign reserves.

``We remain of the view that the BOK will boost its foreign exchange reserves to at least their May 2008 peak of $264 billion and more likely to $300 billion before accommodating selling pressure and allowing the won-dollar exchange rate to trade below 1,200,'' it said.

The local currency closed at 1,228.5 won per dollar Friday, up 8.3 won from the previous close, and the strongest level since Oct. 14, 2008 and the highest closing this year.

The Ministry of Strategy and Finance also expects the reserves to climb to $270 billion by the end of the year.

``The reserves are likely to exceed the previous record, buoyed by trade surplus, the stabilization of the local currency and an influx of foreign capital searching for local stocks,'' a ministry official said.

According to the International Monetary Fund (IMF), the nation's reserves have risen at the second-fastest rate among member countries.

Korea saw its holdings jump by $14.3 billion in May from the previous month, the fastest pace besides Russia, whose reserves rose by $20.2 billion during the same period.

Japan ranked third with a monthly gain of $12.5 billion, followed by Hong Kong ($11.7 billion), Germany ($11.2 billion) and Denmark ($10.7 billion). The data excluded China due to an absence of available statistics.

The country grappled with falling foreign reserves last year as the global economic crisis deepened. The central bank provided foreign currency liquidity for cash-strapped banks by tapping the reserves.

As of the end of May, Korea was the world's sixth-largest holder of foreign exchange reserves after China, Japan, Russia, Taiwan and India.


(c&p)