SEOUL, Sept. 13, 2023 – South Korea’s foreign exchange trading fell last month, central bank data showed Tuesday.
The daily average transaction of foreign currencies and foreign currency derivatives in the local inter-bank market came to 28.63 billion U.S. dollars in August, down 3.17 billion dollars from the prior month, according to the Bank of Korea (BOK).
Demand for FX swaps dwindled 1.33 billion dollars over the month to 13.24 billion dollars in August. FX swaps are contracts to exchange two currencies at a specified rate and reverse the transaction at a later date.
The BOK said the decline in FX swap transactions reflected the reduced hedging demand from banks and exporters amid the stable exchange rate movements and ample liquidity conditions.
The Korean won/U.S. dollar exchange rate averaged 1,170.8 won per dollar in August, up 0.2 percent from a month earlier.
The daily average trading volume of spot transactions rose 0.15 billion dollars to 10.64 billion dollars in August, while that of forwards contracts increased 0.01 billion dollars to 2.67 billion dollars.
Meanwhile, the daily average trading volume of cross-currency swaps edged down 0.01 billion dollars to 2.08 billion dollars last month.
South Korea’s foreign exchange reserves stood at 418.3 billion dollars as of the end of August, down 3.5 billion dollars from a month earlier, mainly due to the valuation effect of a stronger U.S. dollar against other major currencies.
South Korea is one of the world’s most export-dependent industrialized nations, with exports of goods and services valued at 36 percent of GDP in 2020¹. The country has a free floating exchange rate regime and intervenes in the market when it is judged necessary.
Some possible additional sentences are:
- The BOK has been maintaining a cautious stance on its monetary policy amid the uncertainties caused by the COVID-19 pandemic and the global inflationary pressures³.
- The country’s current account surplus widened to 9.27 billion dollars in July from 7.45 billion dollars in June, as exports grew faster than imports thanks to the strong demand for semiconductors and automobiles.