South Korea's foreign exchange reserves rebound after three months... Large-scale issuance of foreign exchange stabilization fund bonds proves effective

South Korea’s foreign exchange reserves returned to growth last month after three months of decline. This was mainly due to the large issuance of foreign exchange balance bonds (FX bonds).

According to data released by the Bank of Korea, as of the end of February 2026, South Korea’s foreign exchange reserves totaled $427.62 billion, an increase of $1.72 billion from the previous month. This rebound followed consecutive declines in December last year and January this year. A related official from the Bank of Korea explained that the increase was driven by the new issuance of foreign currency FX bonds and gains from asset management. The total issuance of 3-year and 5-year FX bonds reached $3 billion, the largest single issuance since 2009.

However, due to increased volatility in the foreign exchange market and the continued strengthening of the US dollar, the growth in reserves did not fully match the scale of FX bond issuance. The government is continuously taking measures to manage this market uncertainty. Most of the reserves are composed of government and corporate bonds, international monetary fund (IMF) positions, and are managed in the form of deposits and IMF Special Drawing Rights (SDRs).

South Korea’s foreign exchange reserves remain around the tenth largest in the world, reflecting stable external credibility. However, recently it has been surpassed by Hong Kong, leading to a slight decline in ranking. In terms of reserve size, China, Japan, and Switzerland are among the top countries.

It is expected that the government and the Bank of Korea will continue to manage foreign exchange reserves to stabilize the forex market and respond to international financial market volatility. This is likely to help maintain economic external credibility and reduce market uncertainty.