S. Korea's daily FX turnover tumbles in Q4

SEOUL, March 5 (Yonhap) -- Foreign exchange trading by banks in South Korea fell
at the fastest rate in almost 11 years last quarter due to increased currency
market volatility, the central bank said Thursday.

The daily foreign exchange turnover averaged US$44.2 billion in the
October-December period, down 22.5 percent from three months earlier and the
sharpest quarterly drop since the first quarter of 1998, according to the Bank of
Korea (BOK).
For all of 2008, however, the daily trading volume rose 19.6 percent on-year to
$55.4 billion, slowing from a 53.4 percent gain in 2007, it added.
"Amid the high volatility of the foreign exchange rate, decreases of exports and
imports brought down spot trading," an official at the BOK said.
Hit by the U.S.-sparked global financial crisis, the Korean won plunged 25.7
percent to the dollar last year, becoming one of the world's worst-performing
currencies.
Daily trading volume of the traditional foreign exchange market, comprising spot
and forward trading and foreign exchange swaps, shed 21.8 percent on-quarter to
$37.8 billion in the fourth quarter, the BOK added.
The daily turnover of spot trading declined 28 percent on-quarter to $15 billion
last quarter, marking the steepest fall since a 34 percent decline in the first
quarter of 1998.
Meanwhile, daily forward trading fell 19.2 percent to $7.98 billion as a decline
in new orders discouraged shipbuilders from selling dollar forwards. Local
shipbuilders and exporters usually unload dollar forwards to hedge currency risks
after winning contracts when the won is widely expected to gain to the dollar.
The data comes as the South Korean currency hit a fresh 11-year low on Monday
amid dollar shortage concerns. The local foreign exchange market has been gripped
by fears that a possible capital outflow by Japanese investors may trigger
another financial crisis in March, leaving local banks unable to service debt due
to dollar shortages.
Maturing short-term debt burden by local banks has also added to market jitters.
According to the government, foreign debt held by local banks and foreign
branches reached $92.6 billion as of the end of January, and $38.3 billion in
overseas debt will mature this year. The government and the BOK have said the
amount is manageable given the country's foreign reserves of over $200 billion.
sooyeon@yna.co.kr
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