South Korean foreign exchange authorities bought about $20 billion (£15.2 billion) in US dollars sold by SK Hynix after the chipmaker’s $26.5 billion American depositary receipt listing in July, according to a source with direct knowledge of the transactions.
The purchases were made by the Foreign Exchange Stabilisation Fund through over-the-counter deals as SK Hynix repatriated the proceeds to South Korea, the source said.
The fund is managed jointly by the country’s finance ministry and the Bank of Korea. The scale of the transactions has not previously been reported, although SK Hynix’s intention to bring the dollars raised in the US back to South Korea was widely known.
SK Hynix, the finance ministry and the Bank of Korea declined to comment on the reported purchases.
Foreign exchange fund replenishes dollar holdings
The move differs from the type of foreign exchange intervention traditionally used by South Korean authorities. It is understood to have helped limit volatility in the currency market while replenishing the fund’s dollar holdings after prolonged efforts to support the won.
South Korea does not officially disclose the precise composition or current size of the Foreign Exchange Stabilisation Fund, which holds US dollars and Korean won. Its operational plan was set at 135.1 trillion won, or about $98.7 billion, last year, but the government’s budget proposal unveiled on Tuesday put the projected figure at about 106.5 trillion won.
The dollar-won exchange rate had approached 1,550 in late June, its weakest level in 17 years, before the won recovered by more than 12 per cent over the following two months, according to Reuters.
SK Hynix’s US share sale was the largest offering by a foreign issuer in the American market. The company has said the proceeds will be used to finance new factories and purchase equipment as it expands production to meet demand for artificial-intelligence chips.
