South Korea Posts Sharp Drop in July Forex Trading
(MENAFN) South Korea’s foreign exchange activity fell sharply in July amid reduced appetite for the U.S. dollar and declining derivatives trades, according to data released Tuesday by the Bank of Korea (BOK).
The average daily volume of foreign currency and derivative transactions in the domestic interbank market dropped to $41.21 billion, a decline of $3.26 billion from June, the central bank reported.
The drop was largely driven by diminished demand for the greenback. Daily average U.S. dollar trading fell by $1.30 billion in July.
Meanwhile, trading in the Chinese yuan saw an uptick, rising by $0.82 billion over the same period.
Foreign exchange swap activity also declined. Average daily demand for FX swaps decreased by $1.55 billion, settling at $17.64 billion in July. Other foreign currency derivatives—including currency swaps and options—fell by $0.55 billion to $2.50 billion.
Despite the drop in trading volume, South Korea’s capital markets continued to attract overseas investors. The local stock market recorded a foreign capital inflow of $2.44 billion in July, while the bond market saw a net foreign investment of $2.40 billion.
Volatility in the won-dollar exchange rate eased last month. The daily average rate fluctuation dropped to 0.37 percent, compared with 0.64 percent in June.
However, the South Korean won weakened against the dollar, with the exchange rate closing July at 1,387.0 won per dollar—up from 1,350.0 won a month earlier.
Credit risk indicators showed improvement. The average premium on five-year credit default swaps—a measure of sovereign risk—declined to 24 basis points in July from 27 basis points in June.
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