S.Korea's March FX reserves see biggest drop since 2008 on currency intervention

SEOUL, April 3 (Reuters) – South Korea’s foreign exchange reserves fell by the most in more than 11 years at the end of March as authorities sold dollars to steady the local FX market hammered by the coronavirus pandemic and as the greenback firmed, the central bank said on Friday.

FX reserves held by the Bank of Korea (BOK) totalled a $400.21 billion as of end-March, the smallest since May 2018. The $8.96 billion drop from $409.17 billion at end-February was the most since an $11.74 billion decline in November 2008.

The decrease in reserves “was driven by the FX authorities’ market stabilisation measures as well as the decline in conversion value of its holdings of other currencies on strengthened U.S. dollar”, the BOK said in a statement.

The data comes after local FX authorities last month warned against speculation on the currency market following a sharp drop in the won.

The won plunged to 1,296.0 per dollar in mid-March, nearly 10% weaker than the highest trading level of 1179.9 during the month.

Last week, South Korea’s vice finance minister said the government expected FX reserves to be reduced temporarily as part of it will be used to ease liquidity shortages in companies and financial institutions. (Reporting by Joori Roh; Editing by Himani Sarkar)

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