South Korea’s foreign exchange reserves last month posted the sharpest drop in over a decade due to the government’s intervention in the foreign exchange market and the strengthened US dollar value, the central bank said Friday.

As of the end of March, the nation’s foreign exchange reserves stood at $400.21 billion, down $8.96 billion from a month earlier, according to the Bank of Korea. It fell by the largest margin since November in 2008 when the global financial crisis was hitting the nation.

“The government‘s market stabilization operations combined with the strong US dollar trend caused a drop in foreign exchange reserves,” a BOK official said. 

Earlier, the BOK supplied $8.7 billion for local financial institutions under a $60 billion currency swap deal with the US Federal Reserve on March 19 to ease the latest US dollar crunch. 

The steps came as economic uncertainties from the new coronavirus have led investors to scramble for the greenback, with the exchange rate soaring over 1285.70 won last month, the highest record in 11 years. 

In addition, the strong US dollar drove down the dollar denominated value of other foreign currencies, which further cut the value of Korea’s foreign exchange reserves. 

The Australian dollar and UK pound weakened by 6 percent and 4 percent, respectively against the US dollar last month, the BOK data showed. Last month, the dollar index, a measure of dollar strength against other foreign currencies, reached 99.18, up 0.7 percent from a month earlier. 

Breaking down the reserves by assets, marketable securities including government bonds, asset-backed securities and others amounted to $357.6 billion at the end of March, down $13.62 billion from a month earlier. 

However, foreign savings reached $31.72 billion, up $4.62 billion from a previous month and the IMF’s Special Drawing Rights, an international reserve asset, also rose $40 million to $3.3 billion.

Holdings in the IMF reserve position, an emergency account that its member countries can access at their discretion, as well as gold bullion, remained unchanged at $2.8 billion and $4.8 billion, respectively during the same period. 

Meanwhile, the BOK said South Korea was the world‘s ninth-largest holder of foreign exchange reserves as of the end of February. 

By Choi Jae-hee (cjh@heraldcorp.com)