In the third quarter of this year, the average daily foreign exchange transaction amount at foreign exchange banks hit $82.84 billion, setting a record high for the third straight quarter. While derivatives transactions decreased as won-dollar exchange rate volatility narrowed, spot transactions rose largely due to extended foreign exchange market hours.
According to the Foreign exchange transaction trends of foreign exchange banks released by the Bank of Korea on the 27th, the average daily foreign exchange transaction volume at foreign exchange banks in the third quarter (including spot and foreign exchange derivatives) was tallied at $82.84 billion, up 0.8% ($680 million) from the previous quarter ($82.16 billion). This is the highest since the statistics were revised in 2008, and marks a new record for the third consecutive quarter following the first and second quarters of this year.
The Bank of Korea (BOK) said the increase was largely due to a rise in spot transactions following the extension of foreign exchange market hours in July last year. In fact, the third-quarter spot transaction volume rose 6.4% ($2.09 billion) from the previous quarter to $34.86 billion.
In contrast, foreign exchange derivatives transactions decreased as won-dollar exchange rate volatility narrowed. Accordingly, the overall increase in transactions was smaller than in the previous quarter (+$9.4 billion). The third-quarter foreign exchange derivatives transaction volume fell 2.9% ($1.41 billion) from the previous quarter to $47.98 billion. The average daily volatility of the won-dollar exchange rate fell to 0.35% in the third quarter from 0.61% in the second quarter.
Breaking down spot transactions by currency, won-dollar transactions rose to $26.01 billion (up 2.0% from the previous quarter), and won-yuan transactions rose to $3.82 billion (+59.5%). By bank, transactions at domestic banks ($19.64 billion) and foreign bank branches ($15.22 billion) increased by 8.1% ($1.47 billion) and 4.2% ($620 million), respectively.
By type of derivatives transaction, forward transactions ($13.94 billion) fell 9.4% ($1.45 billion) from the previous quarter due to a decrease in NDF (non-deliverable forward) transactions (-$1.17 billion). In contrast, foreign exchange swap transactions ($32.51 billion) rose 0.7% ($220 million) as mutual transactions between foreign exchange banks (+$110 million) and transactions with nonresidents (+$230 million) increased.