Seasonal Factors
In the first quarter of this year, the average daily value of foreign exchange transactions crossed US$66.8 billion, a record high. This is due to the resumption of trading at the beginning of 2023, which led to an increase in foreign exchange transactions and a rise in overseas investment by residents.
The average daily volume of foreign exchange transactions (spot exchange and foreign exchange derivative transactions) of foreign exchange banks in the first quarter of this year stood at US$66.83 billion, up US$9.4 billion from the previous quarter, according to data about foreign exchange transactions at foreign exchange banks in Korea in January 2023, released by the Bank of Korea on May 2. This is the highest since statistics began in 2008.
The sharp increase in foreign exchange volumes was primarily due to seasonal factors. After trade shrank due to a year-end book closure, foreign exchange transactions increased as trading resumed in the first quarter. In addition, residents’ investment in foreign securities and foreigners’ investment in Korean securities increased significantly. Domestic investors’ settlement of foreign currency securities swelled from US$79.6 billion in the fourth quarter of last year to US$97.5 billion in the first quarter of this year.
Spot foreign exchange transactions amounted to US$26.45 billion, up US$5.58 billion from the previous quarter. By currency, won-dollar trading stood at US$18.9 billion, up US$3.85 billion or 25.6 percent, and won-yuan trading US$3.23 billion, up US$1 billion or 44.9 percent.
Foreign exchange derivative transactions totaled US$40.39 billion, up US$3.81 billion from the previous quarter. Forward foreign exchange transactions led by offshore non-deliverable forward (NDF) transactions with non-residents increased by US$1.93 billion to US$13.37 billion. Swap transactions also inflated by US$1.51 billion to US$25.63 billion, led by non-residents.