South Korea’s foreign exchange reserves totaled $442.28 billion (approximately 600.4 trillion won) as of the end of August, according to statistics released by the Bank of Korea on September 3. The figure rose by $14.33 billion (approximately 19.5 trillion won) from $427.95 billion at the end of July, marking the largest monthly increase on record. The previous record was $14.29 billion set in May 2009.

Foreign exchange reserves have now increased for three consecutive months since June. However, in absolute terms, the current level remains roughly $40 billion below the all-time high of $469.21 billion reached in October 2021.

The BOK attributed the increase primarily to an expansion in foreign currency deposits held by financial institutions. These deposits refer to funds that banks and other financial companies are required to place with the central bank as reserve requirements against their foreign currency deposits. A BOK official explained, “We believe financial institutions’ foreign currency liquidity has been so abundant that a significant portion flowed into reserve requirements.”

Earlier this year, the BOK began paying interest on excess reserves, and in June extended the measure for another six months. Analysts say this prompted banks to park large amounts of surplus foreign currency funds with the central bank, leading to the sharp rise in reserves.

By asset class, Marketable Securities—including government bonds and corporate bonds—totaled $387.07 billion, up $7.07 billion from the previous month. Deposits rose by $7.17 billion to $30.3 billion, extending gains for a fourth consecutive month. Special Drawing Rights (SDR) increased by $60 million to $15.77 billion, while the International Monetary Fund (IMF) reserve position rose by $30 million. Gold holdings were maintained at $4.79 billion, in line with the convention of valuing gold at acquisition cost.

Foreign exchange reserves have fluctuated throughout this year due to exchange rate movements and market stabilization measures. Reserves fell by $2.6 billion in December last year and by $2.15 billion in January, then rose by $1.72 billion in February before plunging $3.97 billion in March. They increased by $4.22 billion in April, followed by a decline of $880 million in May.

With three consecutive months of gains from June through August, the net increase since the start of the year reached $14.23 billion. Reserves climbed from $428.05 billion at the end of last year to $442.28 billion at the end of August.

Meanwhile, the BOK has decided to stop publishing South Korea’s global ranking in foreign exchange reserves in its monthly press releases starting this month. The item has been dropped for the first time in 25 years and 6 months, since the end of February 2001. The BOK changed the data format without any prior explanation, citing that the ranking itself carries limited informational value for assessing external soundness and that monthly fluctuations could be given excessive significance.

Indeed, South Korea’s foreign exchange reserve ranking has been volatile recently. The country maintained its position as the world’s 9th-largest holder through the end of last year, but slipped to 10th in January and 12th in February, fell further to 13th by the end of May, before recovering to 10th by the end of June. The temporary decline was attributed to large-scale deployment of reserves to stabilize the foreign exchange market as the won-dollar exchange rate surged.

A BOK official said, “We changed the data format after considering that it is difficult to attach great significance to the foreign exchange reserve ranking, which is unrelated to external soundness.”

However, the decision has drawn criticism over a failure in public communication. Critics argue it contradicts the communication principles emphasized by BOK Governor Shin Hyun-song. Going forward, anyone seeking to track South Korea’s international ranking in foreign exchange reserves will need to individually compile and compare IMF-provided base data or statistics from each country’s central bank.

Notably, the timing of the ranking disclosure suspension coincides with the month in which foreign exchange reserves posted their largest-ever increase. Some observers suggest the BOK may have considered that withholding data during a period of ranking decline could have sparked controversy.

The BOK recently announced it would resume gold purchases—suspended since February 2013—by buying physical gold from domestic producers for export purposes, but confirmed that no additional purchases were made in August.