Foreign exchange transactions surge as exchange rates fluctuate…Daily average hits record $82.16 billion [Korea Economic Daily FX Market Watch]

In the second quarter, the volume of foreign exchange transactions reached an all-time high. Trading became more active as the volatility of the won-dollar exchange rate increased. The rising investments by foreigners in domestic stocks also had an impact.

According to the Bank of Korea's announcement on the 29th, the average daily foreign exchange transaction volume at foreign exchange banks during April to June was tallied at $82.16 billion. This represents an increase of $9.4 billion (12.9%) from the first quarter’s $72.76 billion, immediately breaking the previous record set just the quarter before.

The increase in FX trading volume began last July, when trading hours were extended until 2 a.m. For the second quarter, increased exchange rate volatility further fueled the growth in volume. The won-dollar exchange rate volatility in Q2 averaged 0.61%, nearly double the 0.36% of Q1. The average exchange rate fell from ₩1,453 per dollar to ₩1,401 per dollar. Foreign investors’ domestic securities trading also rose from a monthly average of ₩223 trillion in Q1 to ₩233 trillion in Q2 (based on April–May).

By product, spot transaction volume stood at $32.77 billion, up $4.82 billion from the previous quarter. The scale of FX derivatives trading was $49.39 billion, an increase of $4.58 billion quarter-on-quarter. FX swap trading volume posted $32.29 billion. For the first time since 2017, FX swap volume was lower than the spot transaction volume.

Kang Jin-kyu, josep@hankyung.com