Korea pays its first $2.4 billion U.S. investment out of foreign exchange reserves
South Korea's foreign reserves fell $1.72 billion in September to $440.56 billion after the government paid $2.4 billion of reserve assets into its first U.S. project. The payment is about half a percent of reserves, and it makes the U.S. investment program a line item in Korea's monthly reserve data.
The Investor · Invest desk
What happened
- August's record monthly gain of $14.33 billion had lifted reserves to $442.28 billion, their highest level since May 2022.
- The Bank of Korea and the Foreign Exchange Equalization Fund entrusted the money to the Korea-U.S. Strategic Investment Corp., which passed it to a U.S. vehicle funding the Encinal gas plant in Texas.
- A Bank of Korea official named three causes: lower foreign currency deposits held by financial institutions, the entrustment, and a weaker dollar value of non-dollar assets.
- The Bank of Korea also plans to resume buying physical gold for the first time in 13 years, possibly starting at the end of this year.
Why it matters
- What it costs cost A single remittance the size of Encinal is 2.5 times the reserve gains of June and July combined, so slow months of ordinary growth cannot cover a transfer.
- Who's exposed exposure State foreign currency is now tied to construction of one Texas gas plant, held through a U.S. special-purpose vehicle outside the reserve count.
- What doesn't add up contradiction Yonhap's account of the same release attributes the fall only to lower deposits at financial institutions, so the U.S. payment's share of September's drop is an inference the central bank did not quantify.
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The category lines do not add up to the transfer. Securities fell $1.05 billion to $386.03 billion [4], deposits fell $350 million to $29.95 billion [5] and special drawing rights fell $290 million [20], a combined $1.69 billion [14]. That is less than the $2.4 billion paid for the U.S. project [10]. If the whole remittance left the reserve count, everything else in September added about $680 million on net [15]. That happened in a month when a stronger dollar cut the dollar value of euro, yen and pound holdings [3].
Those two losses behave differently. The currency loss is a mark on assets Korea still holds, and it reverses if the dollar gives back its September gain [3]. The $2.4 billion is a payment out [10], and no move in the exchange rate brings it back into the reserve count.
There are three ways the program could look a year from now. Later projects could go through the same joint entrustment by the central bank and the Foreign Exchange Equalization Fund [10], and each would show up as a subtraction like September's. They could be paid from some other pool, in which case the reserve line would barely move. Or investment income and currency swings could keep swamping transfers of this size, as they did in August [9].
I think the first case is the likely one, because the first project already used it. Even so, the drain is small at this size. It would take about six remittances the size of Encinal to give back August's gain [18], and reserves still sit $12.61 billion above their end-July level [19]. The sources do not give the program's total size or a schedule for later payments, so a lasting drain on the buffer is a conditional case for now. The view that the drain is small fails if the next several monthly releases show entrustments large or frequent enough to hold reserves down through months of ordinary gains.
The two reports of the release disagree on one line. Seoul Economic Daily puts SDR holdings at $15.48 billion [20] and Yonhap at $15.77 billion [21], though both have them down $290 million. Gold was unchanged at $4.79 billion [6]. The central bank also stopped publishing country rankings of reserves last month, a practice it had kept since 2000, and said the figures can still be checked through its ECOS database [13].
What to watch
- The October reserve release, and whether a Bank of Korea official again lists entrustment to the Korea-U.S. Strategic Investment Corp. among the causes.
- Any disclosure of the U.S. program's total size, the second project, or a schedule for later remittances.
Information, not investment advice. This story is general information about companies and markets, drawn from cited reporting. It is not a recommendation to buy, sell or hold any security; check the cited sources before acting.
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- [1]
South Korea's foreign exchange reserves stood at $440.56 billion at the end of September, down $1.72 billion from the previous month, according to Bank of Korea data.
- [2]
A Bank of Korea official said the decline reflected a drop in foreign currency deposits held by financial institutions, the entrustment of assets to the Korea-U.S. Strategic Investment Corp., and a decrease in the dollar value of assets held in other currencies.
- [3]
The dollar's appreciation in September from August reduced the dollar-converted value of assets held in euros, yen and pounds, contributing to the decline.
- [4]
Securities including stocks and bonds fell $1.05 billion to $386.03 billion.
- [5]
Deposits declined $350 million to $29.95 billion.
- [6]
Gold holdings were unchanged at $4.79 billion.
- [7]
Reserves rose $370 million in June and $590 million in July.
- [8]
The Bank of Korea attributed the fall to a decline in foreign currency deposits held by financial institutions.
- [9]
Reserves posted a record monthly gain of $14.33 billion in August; the August balance of $442.28 billion was the highest since May 2022.
- [10]
The government remitted its first $2.4 billion in investment funds to the United States, drawing on foreign currency assets held by the Bank of Korea and the Foreign Exchange Equalization Fund.
- [11]
The Bank of Korea and the Foreign Exchange Equalization Fund jointly entrusted $2.4 billion to the fund of the Korea-U.S. Strategic Investment Corp., which transferred it to the account of a U.S. special-purpose investment vehicle; the funds go toward construction of the Encinal combined-cycle gas power plant in Texas, the first project under the program.
- [12]
The Bank of Korea has announced it will resume purchases of physical gold for the first time in 13 years, with buying expected to begin as early as the end of this year.
- [13]
The Bank of Korea stopped publishing country rankings of foreign reserves last month, a practice maintained since 2000, and said the data can still be checked through its Economic Statistics System (ECOS).
- [14]
Securities, deposits and SDRs fell a combined $1.69 billion in September.
- [15]
If the full $2.4 billion left the reserve count, all other September movements added about $680 million on net.
- [16]
The $2.4 billion transfer is about 0.54% of end-September reserves.
- [17]
The $2.4 billion transfer is 2.5 times the combined June and July reserve gains of $960 million.
- [18]
About six remittances of $2.4 billion would equal August's $14.33 billion gain.
- [19]
End-September reserves are $12.61 billion above the implied end-July level of $427.95 billion.
- [20]
Special drawing rights at the IMF fell $290 million to $15.48 billion.
- [21]
Special drawing rights fell $290 million to $15.77 billion.
Sources
2 independent publishers whose own reporting we read for this story.
- en.sedaily.comKorea's Foreign Reserves Fall for First Time in Four Months on U.S. Investment Transfer
1 article · October 5, 2026
- en.yna.co.krForeign reserves snap 3-month rise in Sept.
1 article · October 5, 2026
- koreajoongangdaily.comForeign reserves snap 3-month rise in September
1 article · October 5, 2026
Topics and entities
Topics
- Korea-U.S. investment program
- Foreign exchange reserves
- Central bank gold holdings
Entities
- Korea-U.S. Strategic Investment Corp.
- Bank of Korea
- Special drawing rights
- Economic Statistics System
- Encinal combined-cycle gas plant
- Ministry of Finance and Economy
- International Monetary Fund
- Foreign Exchange Equalization Fund