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MNI is the leading provider
of intelligence and analysis on the Global Fixed Income, Foreign Exchange and Energy markets. We use an innovative combination of real-time analysis, deep fundamental research and journalism to provide unique and actionable insights for traders and investors. Our "All signal, no noise" approach drives an intelligence service that is succinct and timely, which is highly regarded by our time constrained client base.Our Head Office is in London with offices in Chicago, Washington and Beijing, as well as an on the ground presence in other major financial centres across the world.
SOUTH KOREA
South Korea's FX reserves fell by $19.7bn in September. This is the largest monthly drop since the GFC in 2008. Headline FX reserves are now back to $416.8bn. As we noted yesterday, with September's USD/KRW gain of close to 7%, the strongest since September 2011, and the pair breaking through 1400, today’s print was likely to be a market focus point.
- The BoK also noted valuation impacts were a factor as well in terms of the headline drop. Note South Korean holdings of foreign securities fell to $379.4bn in September, down $15.53bn from August.
- We won't get official intervention estimates for several months though for Q3. For Q2 the BoK sold over $15bn to stem won losses.
- Such a fall will maintain focus on the country's vulnerability to further external shocks, particularly from a commodity price/energy bill standpoint. The chart below plots the ratio of imports and short term external debt to FX reserves.
- Both metrics are trending in the wrong direction, although we remain below 2008 highs, particularly on the short term external debt side.
Fig 1: South Korean Imports & Short Term External Debt Ratio To FX Reserves
Source: MNI - Market News/Bloomberg
Why MNI
MNI is the leading provider
of intelligence and analysis on the Global Fixed Income, Foreign Exchange and Energy markets. We use an innovative combination of real-time analysis, deep fundamental research and journalism to provide unique and actionable insights for traders and investors. Our "All signal, no noise" approach drives an intelligence service that is succinct and timely, which is highly regarded by our time constrained client base.Our Head Office is in London with offices in Chicago, Washington and Beijing, as well as an on the ground presence in other major financial centres across the world.
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