Bank of Korea Governor Rhee Chang-yong Addresses Concerns on Foreign Exchange Reserves

In a recent keynote speech at the Winter Conference of the Korean International Economic Association, Bank of Korea Governor Rhee Chang-yong sought to allay concerns regarding the adequacy of Korea's foreign exchange reserves. According to Rhee, the reserves are "very sufficient" and align with the International Monetary Fund's (IMF) qualitative assessment standards.

Rhee clarified that while there may be concerns about Korea's reserves being slightly below the IMF's quantitative assessment standard for emerging financial markets, these standards no longer apply to Korea. Since 2014, Korea has been a net external asset country, and Rhee believes that the current $400 billion in foreign exchange reserves is sufficient for the nation.

Moreover, Rhee emphasized the necessity of considering the broader macroeconomic impact on the foreign exchange market when formulating investment strategies for major pension funds like the National Pension Service (NPS). He noted the significant influence these funds have on the foreign exchange market due to their expanding overseas investments.

In conclusion, Rhee underscored the importance of diversifying return denominations in won and hedging strategies to enhance returns, especially considering the potential impact on the exchange rate during asset sales in the future.