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Forex forwards transaction in S. Korea hits lowest in over 5 years

Xinhua, July 14, 2015 Adjust font size:

Foreign exchange forwards transaction in South Korea hit the lowest in more than five years as demand to hedge forex risks declined due to sluggish exports and lower import prices, central bank data showed on Tuesday.

Demand for forex forwards by local companies amounted to 35.2 billion U.S. dollars in the second quarter, down 9.7 percent from the previous quarter, according to the Bank of Korea. It was the lowest in five and a half years since the fourth quarter of 2009.

Exporters and importers tend to use the forex forward contracts to hedge forex risks. The lower volume of forex forwards trading came from falling exports and lower import prices, leading to reduced demand to hedge forex risks.

Volatility for the won/dollar exchange rate averaged 0.42 percent on a daily basis during the April-June period. It was lower than 0.47 percent in the first quarter, but was higher than an annual average of 0.29-0.34 percent from 2012 to 2014.

Forex spot transactions in the inter-bank market posted a daily average of 24.85 billion dollars in the second quarter, up 6 percent from three months earlier.

Non-deliverable forward transactions recorded 11.37 billion dollars of net buying in the second quarter as offshore investors betted on strong dollar amid rising expectations for the U.S. Federal Reserve's interest rate hike in the second half.

The won/dollar exchange rate averaged 1,097.4 won versus the greenback in the second quarter, down 2.9 won from three months earlier. It indicated the won's 0.3 percent gain to the dollar. Endi