Bank of Korea Reports "Trends in Foreign Exchange Transactions at Foreign Exchange Banks for Q1"
Average Daily Foreign Exchange Trading Volume Reaches $72.76 Billion in Q1
Highest Level Since 2008 Statistical Revision
In the first quarter of this year, the average daily foreign exchange trading volume in South Korea reached a record high for any quarter. In addition to seasonal factors typical of the first quarter, the scale of foreign exchange transactions expanded due to increased foreign investment in domestic securities, particularly bonds, and a rise in demand for foreign exchange risk hedging as the exchange rate increased.
According to the "Trends in Foreign Exchange Transactions at Foreign Exchange Banks for the First Quarter of 2025," released by the Bank of Korea on April 25, the average daily foreign exchange trading volume (including spot and derivatives transactions) at foreign exchange banks in the first quarter of this year was $72.76 billion. This represents an increase of $5.02 billion (7.4%) compared to the previous quarter's $67.73 billion. This is the highest figure since the statistical revision in 2008. The previous record was $70.91 billion in the third quarter of last year.
This result reflects seasonal factors in the first quarter, increased foreign investment in domestic securities, and higher demand for foreign exchange risk hedging due to the rising exchange rate. A Bank of Korea official explained, "In the first quarter, there is a tendency for transactions to increase again after a decline in the fourth quarter of the previous year due to year-end book closing." Over the past five years, the average increase in the first quarter compared to the previous quarter was 14.1%. Foreign investment in domestic securities was centered on bonds. As the incentive for arbitrage trading grew, net inflows of foreign bond funds increased from $3.59 billion in the fourth quarter of last year to $7.1 billion in the first quarter of this year. The average won-dollar exchange rate jumped from KRW 1,398.7 in the fourth quarter of last year to KRW 1,452.9 in the first quarter of this year.
The spot foreign exchange trading volume in the first quarter was $27.94 billion, up $2.3 billion (9.0%) from the previous quarter. Won-dollar transactions totaled $20.35 billion, an increase of $860 million (4.4%). The volume of foreign exchange derivatives transactions was $44.81 billion, up $2.73 billion (6.5%) from the previous quarter.
By bank type, domestic banks saw their trading volume increase by $1.49 billion (4.8%) from the previous quarter to $32.54 billion, while the trading volume at foreign bank branches also rose by $3.53 billion (9.6%) to $40.22 billion.
The average daily trading volume of foreign exchange derivatives was $44.81 billion, an increase of $2.73 billion (6.5%) from the previous quarter. Forward transactions ($13.41 billion) increased by $430 million (3.3%) from the previous quarter, mainly due to non-deliverable forward (NDF) transactions ($320 million). Foreign exchange swap transactions ($29.93 billion) increased by $2.04 billion (7.3%) from the previous quarter, as both transactions with domestic customers ($810 million) and non-residents ($890 million) grew.
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