South Korea’s foreign exchange reserves declined for a second consecutive month in December as a weaker euro and a softer pound reduced the conversion value of non-dollar assets, the central bank said Tuesday.

The country’s foreign reserves reached $306.4 billion last month, down $2.23 billion from the previous month, according to the Bank of Korea. The December reading marked the second straight monthly decline since the foreign reserves hit $310.98 billion in October.

“The biggest reason was the lower conversion value of non-dollar assets into U.S. dollars,” said Shin Jae-hyuk, an economist at the BOK. “Due to the weakness in the euro and the pound, the conversion value of assets denominated in these currencies decreased.”

South Korea held 36.3 percent of its foreign reserves in non-dollar assets as of the end of 2010, according to the latest data.

In December, the euro depreciated 3.7 percent to the U.S. dollar as the sovereign debt crisis raised fears of the eurozone default. The British pound declined 1 percent against the greenback.

South Korea’s foreign reserves hit a fresh record high of $312.19 billion in August since surpassing the $300 billion mark for the first time in April amid sustained inflows of foreign capital and robust exports.

Foreign reserves consist of securities and deposits denominated in overseas currencies, along with International Monetary Fund reserve positions, special drawing rights and gold bullion.

As of the end of November, South Korea was the world’s seventh-largest holder of foreign exchange reserves, climbing one notch from the previous month.
 
(Yonhap News)