FX Swap Points Decline on Short-Term Tenors After Quarter-End Spike

Short-term foreign exchange (FX) swap points declined on July 6, while mid-to-long term tenors closed flat. The decline reversed a late-June surge driven by quarter-end won liquidity imbalances that pushed overnight swap points as high as +1.10 won. Market participants attributed the downward pressure to ultra-short tenor adjustments spreading to longer maturities.

FX Swap Points Close Lower Across Short-Term Tenors

In the foreign currency funding market on July 6, the 1-year FX swap point closed at -14.60 won, unchanged from its opening price. The 6-month tenor also finished at -7.40 won, matching its opening level.

Shorter-dated tenors showed declines. The 3-month swap point fell 0.30 won from its opening to close at -3.50 won. The 1-month tenor dropped 0.20 won to finish at -1.30 won.

Ultra-short tenors overnight (O/N) and tomorrow-next (T/N) both closed at -0.060 won.

Market Reverses Late-June Quarter-End Liquidity Spike

The FX swap market has been unwinding a sharp spike that occurred at the end of late June. Quarter-end won funding imbalances caused overnight swap points to surge to +1.10 won at one point, and the market has since been reversing that move.

A swap dealer at a commercial bank stated: "All tenors generally declined a bit, continuing to reverse the rise that occurred at quarter-end. The significant drop in ultra-short tenors appears to have influenced longer tenors as well."

FAQ

What caused FX swap points to decline on July 6?

Short-term FX swap points declined as the market continued reversing a late-June quarter-end spike. Won liquidity imbalances at quarter-end had pushed overnight swap points to +1.10 won, and the market has been unwinding that surge. Ultra-short tenor declines spread to affect longer maturities.

Which FX swap tenors showed the largest declines on July 6?

The 3-month tenor fell 0.30 won to close at -3.50 won, and the 1-month tenor dropped 0.20 won to finish at -1.30 won. Ultra-short tenors overnight and T/N both closed at -0.060 won. Longer tenors including 6-month and 1-year remained flat at -7.40 won and -14.60 won respectively.