-- South Korea's foreign-exchange reserves tracked in an upwards direction in April, and remained well above levels considered comfortable by international development agencies, reported the Bank of Korea on Thursday.
The nation's foreign-exchange reserves logged at $427.9 billion in April, up $4.2 billion from March.
The growth in South Korea's foreign-exchange reserves is due in part to the nation's surging export picture, and in particular global demand for semiconductors.
South Korea's foreign-exchange reserves are sufficient to cover more than six months of imports. The level is about double the recommended standard of the International Monetary Fund (IMF), that nations keep foreign-exchange reserves on hand equal to three months of imports.
In general, foreign-exchange reserves are assets held by a nation's central bank, generally denominated in US dollars or euros, including cash and non-domestic government bonds. Central bank gold hoards are also regarded as foreign reserves.
Foreign-exchange reserves have several uses.
South Korea's central bank can use the reserves to stabilize the domestic currency, the won, in foreign-exchange markets.
For example, the Bank of Korea can use reserve US dollars to buy back won in foreign-exchange markets, resulting in less of the won on foreign-exchange markets and thus a relatively higher value. This can halt a currency slide.
In addition, an ample amount of foreign reserves can help ensure a nation's financial stability, by allowing national governments to manage economic shocks and fund necessary imports in times of stress, such as oil or key technologies.
Nations accrue foreign reserves by running trade surpluses, by inflows of money from offshore investments, by direct inward foreign direct investment, and, for some nations such as the Philippines, by remittances sent home by offshore workers.