Foreign exchange reserves decrease by $2.6 billion... the government invests US dollars to "stabilize the exchange rate"

Last December, South Korea’s foreign exchange reserves turned downward again after 7 months due to measures such as exchange rate stabilization. According to the Bank of Korea, influenced by factors like foreign exchange market interventions, reserves decreased by 2.6 billion USD from the previous month.

As of the end of December 2025, foreign exchange reserves stood at 428.05 billion USD (approximately 618 trillion KRW). This figure slightly decreased compared to November. Since late May last year, the country’s foreign exchange reserves fell to 404.6 billion USD, reaching the lowest level in about five years. After that, reserves had increased for six consecutive months until November, but this growth trend was broken at the end of the year.

The main reason for the decrease in foreign exchange reserves is government intervention to mitigate exchange rate fluctuations. The Bank of Korea pointed out that, despite factors such as increased foreign currency deposits by financial institutions at quarter-end and the appreciation of other currency assets into USD, the primary cause of the reserve decline remains exchange rate stabilization measures. In fact, when the KRW/USD exchange rate rises or falls sharply, it can exacerbate market instability, prompting the government to intervene by selling USD and defending the KRW.

In terms of asset composition, marketable securities (such as U.S. Treasuries and foreign corporate bonds) accounted for the largest share in foreign exchange reserves and decreased by 8.22 billion USD from the previous month, affecting the overall decline. Meanwhile, deposits at financial institutions increased by 5.44 billion USD, and Special Drawing Rights (SDR) assets from the International Monetary Fund (IMF) increased by 150 million USD. On the other hand, gold reserves remained at 4.79 billion USD, calculated based on purchase price rather than market value, unchanged from the previous month.

As of November 2025, South Korea’s foreign exchange reserves ranked ninth globally. China held the first position with 3.3464 trillion USD, followed by Japan, Switzerland, Russia, India, Taiwan, Germany, and Saudi Arabia.

Although the recent decrease in foreign exchange reserves can be seen as a short-term response to market volatility, a sustained downward trend could impact national creditworthiness or the stability of the foreign exchange market. Future market trends and government intervention efforts are expected to remain key variables influencing changes in foreign exchange reserves.