The OECD has told Korea to take a careful approach to more foreign reserves.
In its latest report on the Korean economy released Tuesday, the Organization for Economic Cooperation and Development said
that foreign exchange reserves are a costly way to fight against foreign exchange volatility.
It said that's because foreign reserves are typically invested in safe assets with low returns.
Instead, the international organization recommended swap agreements that allow related parties to exchange cash flows for a set period of time.
Korea's central bank said earlier this month that the nation's foreign reserves reached an all-time high of over 360-billion U.S. dollars, as of the end of last month, marking the seventh largest foreign reserves in the world, following China, Japan and Switzerland.
The OECD report went on to say that the Korean economy is on an upturn trend after a period of subdued output growth in 2011 and 2012, but added that easing monetary policies and short-term extra budget could take place.
This, when threats to the domestic economy like the nation's household debt problem and instability in emerging markets continue to weigh on Korea.
The OECD expects the Korean economy to grow 4 percent this year and 4.2 percent next year.
And added a strong Korean won trend could benefit local consumers by reducing prices of imported goods and rebalancing toward domestic demand -- one of the main economic agendas of the current administration.
Hwang Ji-hye, Arirang News.
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