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S. Korea Reports Plunge in October Forex Trading
(MENAFN) South Korea's foreign exchange markets contracted in October as tepid investor appetite for Chinese yuan and hedging instruments dragged volumes lower, central bank data released Thursday revealed.
Interbank foreign currency and derivatives trading averaged 42.71 billion U.S. dollars daily throughout October, retreating 0.83 billion dollars from September levels, the Bank of Korea (BOK) reported. The pullback reflected persistent headwinds across multiple market segments as regional uncertainty weighed on trading sentiment.
Weakness in Chinese yuan demand emerged as a primary drag on volumes, with daily average transactions in the currency sinking 0.53 billion dollars. Dollar trading bucked the trend marginally, climbing 0.34 billion dollars during the month as investors rotated toward the greenback amid geopolitical tensions.
Hedging activity deteriorated sharply, with foreign exchange swap demand contracting 0.38 billion dollars to settle at 19.40 billion dollars—a metric closely watched by policymakers monitoring corporate risk management. Transactions in alternative derivatives instruments, encompassing currency swaps and options strategies, edged upward 0.06 billion dollars to 2.74 billion dollars, offering modest offset to the swap decline.
Capital flows painted a mixed picture: foreign investors channeled 3.02 billion dollars into equities while simultaneously extracting 0.72 billion dollars from bonds—a bifurcated positioning reflecting divergent asset class outlooks. Won volatility accelerated markedly, with daily swings versus the dollar climbing to 0.39 percent from 0.28 percent month-on-month, signaling heightened currency turbulence.
The won depreciated against the dollar, trading at 1,424.4 won per dollar by October's close compared to 1,402.9 won in late September. Credit risk premiums on five-year government debt expanded 4 basis points to average 24 basis points, climbing from 20 basis points previously—a gauge reflecting elevated perceived sovereign vulnerability in the region.
Interbank foreign currency and derivatives trading averaged 42.71 billion U.S. dollars daily throughout October, retreating 0.83 billion dollars from September levels, the Bank of Korea (BOK) reported. The pullback reflected persistent headwinds across multiple market segments as regional uncertainty weighed on trading sentiment.
Weakness in Chinese yuan demand emerged as a primary drag on volumes, with daily average transactions in the currency sinking 0.53 billion dollars. Dollar trading bucked the trend marginally, climbing 0.34 billion dollars during the month as investors rotated toward the greenback amid geopolitical tensions.
Hedging activity deteriorated sharply, with foreign exchange swap demand contracting 0.38 billion dollars to settle at 19.40 billion dollars—a metric closely watched by policymakers monitoring corporate risk management. Transactions in alternative derivatives instruments, encompassing currency swaps and options strategies, edged upward 0.06 billion dollars to 2.74 billion dollars, offering modest offset to the swap decline.
Capital flows painted a mixed picture: foreign investors channeled 3.02 billion dollars into equities while simultaneously extracting 0.72 billion dollars from bonds—a bifurcated positioning reflecting divergent asset class outlooks. Won volatility accelerated markedly, with daily swings versus the dollar climbing to 0.39 percent from 0.28 percent month-on-month, signaling heightened currency turbulence.
The won depreciated against the dollar, trading at 1,424.4 won per dollar by October's close compared to 1,402.9 won in late September. Credit risk premiums on five-year government debt expanded 4 basis points to average 24 basis points, climbing from 20 basis points previously—a gauge reflecting elevated perceived sovereign vulnerability in the region.
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