Korea's foreign reserves rise to US$201.2 bln in Dec.

(ATTN: ADDS economist's remarks in para 9)
SEOUL, Jan. 5 (Yonhap) -- South Korea's foreign exchange reserves rose in
December for the first time in nine months as a weaker U.S. dollar boosted the
dollar value of assets in other currencies, the central bank said Monday.

The nation's foreign reserves totaled US$201.22 billion as of the end of
December, up $720 million from a month earlier, according to the Bank of Korea
(BOK).
Foreign reserves consist of securities and deposits denominated in overseas
currencies along with International Monetary Fund reserve positions, special
drawing rights and gold bullion.
The country's foreign reserves had declined for the eighth straight month in
November as the foreign exchange authorities tapped their dollar holdings to
bolster the sliding local currency and ease a dollar crunch.
"Despite a dollar liquidity supply by foreign exchange authorities to ease market
jitters, the foreign reserves rose last month due to higher investment profits
and a rise in the dollar conversion value of non-dollar assets, including the
euro," said Ha Keun-cheol, an official at the BOK.
"Given an expected annual surplus of the current account and eased sell-offs of
stocks by foreigners, it is fair to say that jitters over dollar liquidity
shortages would be eased although the amount of foreign reserves itself could
face some fluctuations."
South Korea's current account began to swing to the black in October, and is
expected to post a surplus worth around $22 billion this year, according to the
central bank.
On Oct. 30, the BOK announced a $30 billion currency swap agreement with the U.S.
Federal Reserve, tapping $10.4 billion out of the swap line so far. The use of
the swap facility helped ease fears about the declining foreign reserves. The
Korean currency fell 25.7 percent to the dollar last year alone, becoming one of
the world's worst-performing currencies.
"I think even if the foreign reserves fall below a critical $200 billion, the
impact may be limited on the foreign exchange markets as recent currency swap
deals serve as a safety valve," said Jun Min-kyu, an economist at Korea
Investment & Securities Co. "But given faltering exports, the country may not
post a larger current account surplus this year as expected. It remains to be
seen whether the local currency gains ground to the dollar until the first
quarter."
The BOK said the government and the central bank have pumped a combined $37.7
billion into the financial system since October out of a planned $55 billion. In
December alone, they supplied $5.8 billion, the BOK added.
As of the end of November, South Korea was the world's sixth-largest holder of
foreign exchange reserves after China, Japan, Russia, Taiwan and India.
sooyeon@yna.co.kr
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