South Korea's Notional Amount of FX and OTC Derivatives Transactions Up Only $19.7 Billion in 3 Years

Rising Currency Hedging Costs Due to Widening Interest Rate Gap
Decreased Hedging Demand Amid Persistently High Exchange Rates
Market Value Down by 2.73 Billion Dollars... 40.3% Drop

The notional amount of South Korea's foreign exchange and over-the-counter (OTC) derivatives transactions increased by only 19.7 billion dollars compared to three years ago, causing its share of the global market to fall to 0.23%. The main reasons were the rise in hedging costs due to the widening interest rate differential between domestic and foreign markets, as well as decreased demand for currency hedging amid persistently high exchange rates. The market value dropped by 27.3 billion dollars, and its global market share also decreased to 0.19%.

An employee is holding US dollars at the Counterfeit Response Center of KEB Hana Bank in Myeongdong, Seoul. Photo by Yonhap News.

According to the results of the 2025 global foreign exchange and OTC derivatives market survey (notional amount section) conducted by the Bank for International Settlements (BIS) and announced by the Bank of Korea on December 12, the notional amount of global foreign exchange and OTC derivatives transactions as of the end of June this year reached 845.7 trillion dollars, up by 213.6 trillion dollars (33.8%) from 632.1 trillion dollars at the end of June 2022. A Bank of Korea official analyzed, "This is the result of heightened uncertainty surrounding trade-related issues and monetary policy outlooks before and after the announcement of US tariff policies in April."

By product, foreign exchange derivatives (155.2 trillion dollars) and interest rate derivatives (665.8 trillion dollars) increased by 41.6% and 32.5%, respectively, compared to the previous survey. Equity derivatives (10.4 trillion dollars) also rose by 48.8%.

The market value of global foreign exchange and OTC derivatives transactions stood at 21.8 trillion dollars, up 3.5 trillion dollars (18.8%). This figure represents the sum of the absolute values of profits and losses, calculated at market prices, for unsettled foreign exchange and OTC derivatives contracts as of the end of June this year. By product, the market value of foreign exchange derivatives (5.4 trillion dollars) and interest rate derivatives (15 trillion dollars) increased by 13.2% and 27.4%, respectively, compared to the previous survey.

The notional amount of South Korea's foreign exchange and OTC derivatives transactions totaled 1.9102 trillion dollars, with an increase of only 19.7 billion dollars (1.0%). By product, the notional amount of foreign exchange derivatives (959.1 billion dollars) decreased by 10.5% compared to the previous survey. In contrast, the notional amount of interest rate derivatives (948.5 billion dollars) increased by 16.4%. A Bank of Korea official explained, "This is estimated to be due to higher currency hedging costs caused by the widening (reversal) of the interest rate differential between domestic and foreign markets, as well as reduced demand for currency hedging resulting from persistently high exchange rates." As a result, South Korea's share of the global market for the notional amount of foreign exchange and OTC derivatives transactions fell to 0.23%, down 0.07 percentage points from the previous survey (0.30%).

The market value of South Korea's foreign exchange and OTC derivatives transactions was 40.4 billion dollars, a decrease of 27.3 billion dollars (-40.3%). By product, the market value of foreign exchange derivatives (32.9 billion dollars) dropped by 46.7% compared to the previous survey, while interest rate derivatives (7.4 billion dollars) increased by 22.7%. This was due to the decrease in the notional amount of foreign exchange derivatives. South Korea's share of the global market value for foreign exchange and OTC derivatives transactions fell to 0.19%, down 0.18 percentage points from the previous survey (0.37%).