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SEOUL - SOUTH Korea's foreign exchange reserves recorded their steepest monthly fall in October since the 1997-98 financial crisis, mainly due to increased liquidity supply to ease jitters, the central bank said on Tuesday.
The reserves totalled 212.3 billion dollars as of end-October, down US$27.4 billion (S$40.64 billion) from a month earlier, marking the seventh straight month of decline.
The Bank of Korea said the reserves fell as authorities expanded dollar supplies to the banking sector to calm fears sparked by the global credit crunch.
The stronger dollar also reduced the dollar conversion value of assets held in other currencies such as the euro.
The central bank said authorities in October supplied more than US$20 billion to the market, mainly through swap deals or the state-run Export-Import Bank of Korea, with most of it used to repay foreign debts of local banks.
South Korea's currency market has been suffering from a dollar shortage amid the credit crunch, accelerating the fall of the won. The local currency has slid around 30 per cent against the dollar this year.
The central bank said future liquidity injections may be smaller than in October because overseas borrowing is expected to ease and the country's current account balance is likely to swing to the black in coming months.
Despite the big drop, the reserves remain the world's sixth largest after China, Japan, Russia, India and Taiwan. -- AFP
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