In the See-Saw Exchange Rate... Last Year Foreign Exchange Transactions at Foreign Exchange Banks Hit an All-Time High

Average Daily Foreign Exchange Transactions of $62.38 Billion
Up 7% Year-on-Year... Impact of Increased Exports and Imports

Last year, foreign exchange transactions by foreign exchange banks surged significantly, reaching an all-time high. This was due to an increase in foreign exchange derivative transactions amid greater exchange rate volatility.

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 of foreign exchange banks last year was $62.38 billion, up $4.08 billion (7%) from the previous year ($58.31 billion). This is the highest level since the statistics were revised in 2008.

The Bank of Korea explained, "Foreign exchange transactions increased substantially due to the growth in import and export volumes and the rise in foreign exchange derivative transactions caused by expanded exchange rate volatility."

According to the Bank of Korea, the daily exchange rate volatility of the KRW-USD rate was 0.32% in 2021 but expanded to 0.50% last year. During the same period, the volume of imports and exports increased from $1.2595 trillion to $1.415 trillion.

By product, spot foreign exchange transaction volume increased by $420 million (1.8%) from the previous year to $23.13 billion. Foreign exchange derivative transaction volume rose sharply by $3.66 billion (10.3%) to $39.25 billion.

By bank type, domestic banks' transaction volume increased by $670 million (2.6%) to $26.64 billion, while foreign bank branches' transaction volume expanded by $3.41 billion (10.5%) to $35.74 billion.

For spot foreign exchange, KRW-USD transactions amounted to $17.32 billion, up $260 million (1.5%). Domestic banks accounted for $12.27 billion, and foreign bank branches accounted for $10.87 billion.

Foreign exchange derivatives saw forward exchange transactions reach $12 billion, increasing by $770 million (6.8%) mainly due to NDF transactions. Foreign exchange swap transactions ($25.83 billion) surged by $2.9 billion (12.7%), centered on interbank transactions among foreign exchange banks.

[Image source=Yonhap News]