FX swap points in South Korea's foreign currency funding market showed divergent trends on the 10th, with short-term maturities weakening while long-term contracts posted slight gains. The 1-year swap point closed at -14.60 won, up 0.20 won from the opening price, despite reports that Hanwha Ocean sold approximately $2 billion in the forward FX market. Market participants refrained from aggressive long-term positioning ahead of the Bank of Korea's monetary policy committee meeting next week, where a potential interest rate hike is under consideration. Dealers noted that asset swaps and forward FX selling continued throughout the session, but activity concentrated in short-term maturities as traders avoided extended exposure before the rate decision.
FX Swap Points Close Mixed Across Maturities on the 10th
The 1-year maturity FX swap point closed at -14.60 won, rising 0.20 won from its opening level. The 6-month contract remained unchanged at -7.60 won, while the 3-month maturity declined 0.15 won to -3.75 won. The 1-month swap point fell 0.10 won to close at -1.25 won.
Ultra-short-term contracts showed limited movement. The overnight (O/N) swap point settled at -0.17 won, and the tomorrow-and-next (T/N) contract rose 0.005 won from its opening to -0.055 won.
Hanwha Ocean Sells $2 Billion in Forward FX Market
Market sources reported that Hanwha Ocean sold approximately $2 billion in the forward foreign exchange market on the 10th. Despite the scale of the transaction, long-term swap point maturities did not weaken as much as typically observed with such volumes.
A swap dealer at a commercial bank stated that under normal circumstances, the 1-year maturity would have declined more substantially given the size of the forward FX selling. Instead, the 1-year contract closed slightly higher. The dealer noted that while asset swaps and forward FX sales occurred steadily throughout the session, participants showed limited willingness to establish positions in longer-dated maturities.
Market Participants Limit Long-Term Positioning Before Rate Meeting
Traders concentrated activity in short-term maturities ahead of the Bank of Korea's monetary policy committee meeting scheduled for next week. Market participants avoided extending positions into longer maturities due to the possibility of an interest rate increase.
The commercial bank dealer explained that short-term contracts saw buy-sell transactions, while longer-dated maturities experienced primarily sell-buy responses. Participants refrained from aggressive positioning in extended tenors as they awaited clarity on the central bank's rate decision.
FAQ
What happened to FX swap points in South Korea on the 10th?
FX swap points showed mixed movements, with short-term maturities weakening while long-term contracts posted slight gains. The 1-year swap point closed at -14.60 won, up 0.20 won from the opening, despite Hanwha Ocean's reported $2 billion forward FX sale.
Why did long-term FX swap points not weaken more despite the large forward FX sale?
Market participants refrained from aggressive long-term positioning ahead of the Bank of Korea's monetary policy meeting next week, where a potential interest rate hike is under consideration. Traders concentrated activity in short-term maturities to avoid extended exposure before the rate decision.
