S.Korea cuts US Treasury holding by $18.9 bn in Jan-July

South Korea had sold a net $18.9 billion of US Treasury bonds in the first seven months of this year, data showed, as foreign exchange authorities were believed to ramp up dollar-selling intervention to slow the won’s decline against the dollar.

The country’s holding of US Treasuries dwindled by 14.4% to $112.3 billion this year as of end-July, according to the data released from the US Department of the Treasury on Monday.

Following the net selling, Asia’s No. 4 economy moved down to the 17th position among foreign holders of the US government debt from 16th at the end of 2021.

Its reduction in US Treasury holding came as the won had depreciated 10.4% this year to average 1,307.45 per dollar in July.

During the period, South Korea’s foreign exchange reserves shrank by 5.3% to $438.6 billion, of which US Treasuries account for a big chunk.

In August alone, South Korea further pared down foreign currency reserves by $2.2 billion from a month before.

Foreign exchange traders said that the recent tumble in the won’s value could lead to an additional reduction in the country’s US Treasury holding.

As the won neared the psychologically important 1,400 per dollar last Thursday, foreign exchange authorities were estimated to have dumped more than $700 million on the day alone to support the won.

The local unit has recovered part of its losses to close domestic trade at 1,393.00 to the dollar on Monday. But it is still hovering at its weakest level in 13 and a half years.

In aggregate, foreign holdings of US Treasuries had decreased by 3.2% to a combined $7.5 trillion in the January-July period.

Japan is the world’s largest holder of US Treasuries with $1.2 trillion, but its holding dwindled by 5.4% during the same period.

China was a net seller of the US government debt as well, dumping a net $98.7 billion in the first seven months to July.

Both China and Japan were speculated to have spent the proceeds selling the greenback in domestic markets to shore up their currencies.

Write to Mi-Hyon Jo at mwise@hankyung.com
Yeonhee Kim edited this article