SEOUL, April 29 (AJP) - South Korea's foreign-exchange (FX) trading volume hit a record high in the first quarter amid heightened volatility and foreign capital inflows, the Bank of Korea said on Wednesday.
According to the central bank, average daily foreign-exchange trading by banks in the first three months of this year including spot and derivatives trading totaled US$102.65 billion, up $18.03 billion, or 21.3 percent, from the previous quarter's $84.62 billion, and the highest since relevant statistics began being compiled in 2008.
"The increase was largely attributed to an inflow of foreign investors into South Korean stocks and bonds," said a BOK official. "Growing volatility in the won-dollar exchange rate amid the prolonged conflict in the Middle East also boosted hedging demand to reduce currency risk."
Their trading rose sharply to a monthly average of 855 trillion won in the first quarter, up from 475 trillion won in the previous quarter.
The BOK added that non-deliverable forward (NDF) and FX swap trading also increased, mainly among companies and institutional investors seeking to lock in future prices and reduce uncertainty from exchange-rate swings.
An NDF is a type of forward contract in which parties settle only the difference between the agreed exchange rate and the spot rate at maturity. Foreign investors often use NDFs to hedge currency risk.
Seasonal factors also played a role, as trading typically slows in the fourth quarter due to year-end book-closing before picking up again in the first quarter.
According to the central bank, average daily foreign-exchange trading by banks in the first three months of this year including spot and derivatives trading totaled US$102.65 billion, up $18.03 billion, or 21.3 percent, from the previous quarter's $84.62 billion, and the highest since relevant statistics began being compiled in 2008.
"The increase was largely attributed to an inflow of foreign investors into South Korean stocks and bonds," said a BOK official. "Growing volatility in the won-dollar exchange rate amid the prolonged conflict in the Middle East also boosted hedging demand to reduce currency risk."
Their trading rose sharply to a monthly average of 855 trillion won in the first quarter, up from 475 trillion won in the previous quarter.
The BOK added that non-deliverable forward (NDF) and FX swap trading also increased, mainly among companies and institutional investors seeking to lock in future prices and reduce uncertainty from exchange-rate swings.
An NDF is a type of forward contract in which parties settle only the difference between the agreed exchange rate and the spot rate at maturity. Foreign investors often use NDFs to hedge currency risk.
Seasonal factors also played a role, as trading typically slows in the fourth quarter due to year-end book-closing before picking up again in the first quarter.
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