South Korea's foreign currency reserves swelled to a new record high in January, adding to the country's buffer against economic and financial turmoil.
The reserves totaled $273.7 billion at the end of January, up $3.7 billion from $270 billion at the end of December, the Bank of Korea said in a statement.
January's figure marked the largest on record, said Moon Han-geun, a senior economist in the Bank of Korea's international department.
South Korea's reserves of major currencies last hit a record high in November but fell in December as the yen and euro weakened, reducing their value in dollar terms.
The reserves are largely invested in securities and deposits, according to the central bank. A small component is a notional currency called Special Drawing Rights which are overseen by the International Monetary Fund. Gold accounts for the smallest portion.
The BOK attributed January's increase to profits on investment of the reserves and the National Pension Service redeeming at maturity its currency swaps with the BOK.
Those factors more than made up for a decline in the dollar value of euro-denominated reserves caused by the single currency's weakness against the greenback, the bank said.
Foreign currency reserves are a key buffer for a country facing economic turmoil because they can be used to defend its currency, provide liquidity and generally shore up the financial system. The South Korean government has touted the reserves as its best defense against any potential currency crisis.
A sharp decline in the holdings came under close scrutiny during the global financial meltdown, however, on nagging fears the country could face such a crisis.
South Korea's reserves had peaked at $264.25 billion in March 2008 but declined to $200.51 billion in November. In October of that year they recorded their biggest monthly decline on record — $27.4 billion — as authorities dipped into the pool of cash to battle the effects of the global credit crisis. The reserves steadily rose again as the global financial system stabilized.
As of the end of December 2009 the reserves remained the world's sixth largest behind those of China, Japan, Russia, Taiwan and India, the central bank said. The statement did not provide a global ranking for January.
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