South Korea’s foreign-exchange reserves posted a sharp decline in March, underscoring the pressure a stronger U.S. dollar is exerting on the country’s external buffers.
Reserves fell by $3.97 billion from a month earlier to $423.66 billion at the end of March, according to data released by the Bank of Korea. The drop marked the steepest monthly decrease in nearly a year.
Officials attributed the decline largely to currency effects, as the stronger dollar reduced the value of assets denominated in other currencies when converted into U.S. terms. Measures aimed at stabilizing the foreign-exchange market also contributed to the decrease.
“The appreciation of the dollar had a notable impact on valuation,” a central bank official said, adding that liquidity operations to smooth market volatility were also a factor.
By asset class, holdings of securities—including government and corporate bonds—fell by $2.26 billion to $377.69 billion. Deposits declined by $1.44 billion to $21.05 billion, while Special Drawing Rights edged down by $200 million to $15.57 billion. Gold holdings were unchanged at $4.79 billion, as they are recorded at historical cost rather than market prices.
The March decline follows a brief rebound in February, when reserves rose for the first time in three months, supported by foreign-exchange stabilization bond issuance. The latest drop highlights how quickly gains can reverse amid shifting global currency dynamics.
South Korea, one of the world’s largest reserve holders, saw its global ranking slip to 12th as of the end of February, down from 10th a month earlier.
Analysts say the trend reflects broader pressures facing economies with diversified reserve portfolios, where non-dollar assets can lose value during periods of dollar strength. Countries that mark gold holdings to market prices have, by contrast, seen relative gains amid rising bullion prices.
For Seoul, the message is clear: even sizable reserves are not immune to currency swings, particularly when the dollar strengthens rapidly against major currencies.
