Bank of Korea in Trouble?
By: PipsAngels
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The Bank of Korea said in a statement that the country's foreign exchange reserves dropped to $212.25 billion from September to October. That is a drop of $27.4 billion from last months levels.
According the the Bank of Korea, authorities injected more than $12.7 billion to ease a dollar shortage in Korea's money markets. Their markets were hit by the global financial crisis which has made international banks hesitant from lending money to emerging-market countries.
The Korean Won had fallen nearly 20% in October to its lowest levels in over 10 years against the US Dollar, before recovering most of its loss in the last several days. The recovery was due to the Korean authorities announcing policies to help rebuild confidence in their market.
Since the end of March, South Korean foreign reserves have declined by a total of $52 billion, reaching levels near December 2005.
The Bank of Korea released a statement saying, "The foreign exchange authorities increased the supply of foreign currency funds to help stabilise the local foreign currency money markets in the wake of a deepening global credit crunch."
The statement went on to say that the value of non-dollar currencies against the USD also contributed to the decline in reserves, but it didn\\\'t show a breakdown of those currencies.
South Korea has been injecting money into its banking system to stop the Won\\\'s falling trend and to avoid worsening the financial crisis that may be leading the country to default status similar to the crisis from 10 years ago.
It said drops in the value of non-dollar currencies against the U.S. dollar also contributed to the decline in foreign reserves put in dollar terms. It did not provide a breakdown.
South Korea has been pouring dollars into its banking system to stop the won\\\'s freefall and avert the repeat of a 1997/98 financial crisis, that had put the country on the verge of default.
According to the central bank, South Korea had the world\\\'s sixth-largest foreign exchange reserves after China, Japan, Russia, India and Taiwan, as of the end of September.
