South Korea's FX Swap Points Normalize on August 6 as Reserve Requirement Deadline Passes

According to Yonhapinfomax, South Korea's FX swap points normalized on August 6 after the month-end foreign exchange reserve requirement deposit deadline was completed. The 1-month swap fell 0.25 won to -0.45 won, while the 3-month, 6-month, and 1-year contracts dropped to -2.25 won, -6.00 won, and -12.70 won respectively. Earlier in late July and early August, swap points had shown unusual strength, with overnight rates briefly reaching +1.80 won and 1-month swaps entering positive territory for the first time in about 4 years and 2 months.

Market participants attributed the adjustment to completed reserve requirement demand and declining domestic bond yields. However, analysts note that the recent spike reflected underlying structural issues in won liquidity supply and demand across institutions, rather than a dollar shortage. A foreign bank swap dealer noted that if won funding conditions remain uneven between institutions, similar distortions could recur.