Korean FX Swap Points Rise as WGBI and SK Hynix Funds Create Dollar Surplus

Korean foreign exchange swap points rose on the 24th, reflecting a market imbalance where dollar supply exceeded won availability. The 1-year FX swap point closed at -12.90 won, up 0.70 won from the opening price, while shorter maturities also gained across the board. The upward movement stemmed from dollar inflows tied to World Government Bond Index (WGBI) inclusion funds and SK Hynix's American Depositary Receipt (ADR) listing, which created abundant dollar liquidity against tight won supply. Bank swap dealers noted strong sell-buy demand despite growing expectations of Federal Reserve rate hikes.

Swap Point Movements Across Maturities

The 6-month swap point closed at -5.80 won, up 0.70 won from the opening. The 3-month maturity rose 0.40 won to -2.30 won, while the 1-month contract gained 0.35 won to close at -0.30 won. Ultra-short maturities showed overnight (O/N) swap points quoted at -0.11 won and tomorrow-and-next (T/N) at 0 won. Gains extended across all tenors as dollar abundance met won scarcity.

WGBI and SK Hynix Flows Drive Dollar Surplus

Month-end WGBI inclusion funds and SK Hynix ADR listing capital created substantial dollar inflows into the Korean market. Won demand surged despite growing Federal Reserve rate hike expectations, pushing swap points higher. A bank swap dealer stated, "There is a lot of dollar liquidity and not much asset swap activity. The impact of banks receiving large SK Hynix dollar deposits is also present."

Bank Dealers Report Strong Sell-Buy Demand

Another bank swap dealer described the rally as pronounced enough to turn the 1-week segment positive. "Won is tight and dollars are abundant, with tremendous sell-buy demand," the dealer said. The trader added, "It seems there are many dollars to process from WGBI-related funds and SK Hynix volumes. The upward movement centered on short tenors is spreading to longer maturities."

FAQ

What caused Korean FX swap points to rise on the 24th?
Swap points increased due to abundant dollar supply from WGBI inclusion funds and SK Hynix ADR listing capital, combined with tight won liquidity. This imbalance drove sell-buy demand across all maturities.

How did different FX swap maturities perform on the 24th?
The 1-year swap point closed at -12.90 won (up 0.70 won), 6-month at -5.80 won (up 0.70 won), 3-month at -2.30 won (up 0.40 won), and 1-month at -0.30 won (up 0.35 won). Overnight and T/N maturities quoted at -0.11 won and 0 won respectively.