Tuesday, October 20, 109 - The weakness of the U.S. dollar has many policymakers in Asia's reserve-rich countries studying ways to reduce the portion of dollar assets in their funds, central bank officials and analysts said yesterday. They said Korea, whose foreign exchange reserves stand at $254.2 billion, is no exception.
They said the Bank of Korea is mulling reducing the proportion of dollar-denominated assets in reserves, which currently stands at 64.5 percent of the total fund.
"If the reserves are to be diversified, the process is unlikely to be not a speedy one," a BOK official was quoted as saying by Yonhap News.
Since the launch of the euro in 2000, the proportion of dollar assets in Korean foreign-exchange reserves dropped by an average 0.5 percent a year. According to U.S. data, Korea's holding of U.S. Treasury securities dropped to $27.2 billion at the end of 2009, from $39.2 billion two years earlier.
Critics, however, say the central bank should move more quickly to diversify out of dollar assets, with some insisting buying more gold instead.
"It is widely expected that the dollar will remain weak for the time being and gold prices will continue to rise, but the BOK is holding onto dollar assets," Rep. Lee Hye-hoon said during a parliamentary session earlier this week.
Korea is the world's sixth-largest holder of foreign reserves but its ranking drops to 56th when it comes to gold reserves. The nation holds 14.4 tons of gold. Gold makes up just 0.2 percent of the country's reserves fund.
China, the world's largest holder foreign reserves, has been building up gold reserves. It said in April that it holds 1054 tons of gold, up from 600 tons in 2003. The percentage of gold in its forex reserve is still less than 2 percent.
BOK Governor Lee Seong-tae, however, is cautious about expanding gold reserves.
"Gold has high price volatility and it is not more difficult to convert into cash," he said.
The price of gold, which was around $850 per ounce in 1980s, had dropped to $250 in 1990s and is now beyond $1,000, he said.
(milaya@heraldm.com)
By Lee Sun-young
