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A Hana Bank employee counts dollars in this undated file photo. (Yonhap)

South Korea’s foreign exchange reserves declined by close to US$20 billion last month, when the won-dollar exchange rate rose above 1,400 won. That’s the biggest drop in the reserves since the 2008 financial crisis.

The Bank of Korea announced the US$19.66 billion drop on Thursday, reporting that the country’s foreign exchange reserves ended September at US$416.77 billion.

That was much bigger than the previous month’s drop of US$2.18 billion. It was Korea’s second-biggest drop ever, after the US$27.42 billion plunge in October 2008, in the middle the global financial crisis.

That said, the drop only represented 4.5% of the total reserves, amounting to the 32nd biggest proportional decrease.

“As a percentage of the total, this doesn’t hold a candle [to previous crises]. We hope that the decrease in our foreign exchange reserves will be understood in the context of our response [to herd behavior in the market],” said Choo Kyung-ho, Korea’s deputy prime minister and minister of economy and finance, on Thursday.

Choo was attributing the big dip in the foreign exchange reserves to a dollar selloff by Korea’s foreign exchange authorities, who have been seeking to ease the soaring exchange rate.

After topping 1,400 won on Sept. 22, the won-dollar exchange rate climbed as high as 1,442.2 won during trading on Sept. 28. Since then, the rate has been on the decline, dipping to 1,397.1 won on Thursday before closing the day at 1,402.4 won.

Another reason for the decline in Korea’s foreign exchange reserves is the falling value of assets denominated in the euro and other non-dollar currencies when converted to dollars. The euro (-2.0%), the pound (-4.4%) and the yen (-3.9%) all depreciated relative to the dollar during the month of September.

By Lee Jae-yeon, staff reporter

Please direct questions or comments to [english@hani.co.kr]