FX swap points in South Korea's foreign exchange funding market declined across most maturity tenors on the 9th amid risk-off sentiment and thin buy-side quotes. The 1-year swap point closed at -13.80 won, down 0.30 won from the opening, while the 6-month tenor fell 0.30 won to -6.10 won and the 3-month tenor dropped 0.25 won to -3.05 won. The decline was driven by sparse buy-side liquidity and afternoon exporter nego flows that pressured the spot dollar-won rate and short-term swap points, with the negative sentiment spreading to medium- and long-term tenors. A securities swap dealer attributed the move to psychological risk aversion stemming from heightened US stock market volatility rather than actual funding stress.
Swap Point Declines Across Maturity Tenors on the 9th
The 1-year FX swap point closed at -13.80 won, down 0.30 won from the opening price. The 6-month tenor fell 0.30 won to -6.10 won, and the 3-month tenor declined 0.25 won to -3.05 won. The 1-month tenor dropped 0.10 won to close at -0.90 won. In the ultra-short-term segment, the overnight (O/N) tenor rose 0.005 won to -0.02 won, while the tomorrow-and-next (T/N) tenor fell 0.005 won to -0.06 won.
Thin Buy-Side Quotes and Exporter Flows Drive Afternoon Decline
Trading volumes remained light throughout the session, and thin buy-side quotes contributed to downward pressure on swap points across the curve. In the afternoon, exporter nego flows entered the market, pushing down both the spot dollar-won rate and short-term swap points. A securities swap dealer stated, "Overall trading volume was not large, and with buy-side quotes sparse, swap points tended to decline. In the afternoon, a significant amount of nego flows emerged, causing both the spot rate and short-term tenors to fall together, and this sentiment spread to the long-term tenors as well."
Risk-Off Sentiment from US Stock Volatility Weighs on Market Psychology
The dealer noted that risk-off sentiment intensified following sharp declines and heightened volatility in US stock markets since the previous week, weighing on swap points. The dealer added, "Since last week, the New York stock market has fallen sharply and volatility has expanded, strengthening risk-aversion sentiment and making swap points heavy. However, for a further sharp decline to occur, funding stress issues would need to emerge, and we are not yet in that situation — the impact of psychological contraction also appears significant." The dealer emphasized that the decline reflected market psychology rather than actual foreign currency funding stress.
FAQ
What happened to South Korea's FX swap points on the 9th?
FX swap points declined across most maturity tenors on the 9th, with the 1-year tenor closing at -13.80 won (down 0.30 won), the 6-month tenor at -6.10 won (down 0.30 won), and the 3-month tenor at -3.05 won (down 0.25 won). The decline was driven by thin buy-side quotes and afternoon exporter nego flows.
Why did FX swap points fall despite no funding stress?
A securities swap dealer attributed the decline to psychological risk aversion stemming from heightened US stock market volatility rather than actual foreign currency funding stress. The dealer stated that while risk-off sentiment intensified following sharp US stock declines since the previous week, no funding stress issues had emerged to justify a further sharp decline.
