FX swap points for short-term tenors are rising sharply on the 27th following large-scale dollar supply related to SK Hynix. The 1-month FX swap point rose to the 'par (0.00 won)' level and further increased in the afternoon to show 0.05 won, marking the first time the 1-month tenor has entered positive territory since recording 0.05 won on June 2, 2022 — a span of 4 years and 2 months. The 1-week tenor also rose to 0.25 won on this day, showing the highest level in approximately 3 years and 7 months since 0.30 won in December 2022. Market participants attribute this movement to the sequential conversion process of large-scale dollar funds that flowed in from SK Hynix's American Depositary Receipt (ADR) listing, with some portion entering the banking sector in the form of dollar deposits.
FX Swap Points Reach Multi-Year Highs
The 1-month FX swap point's move into positive territory represents the first occurrence since June 2, 2022, when it recorded 0.05 won. The 1-week tenor's rise to 0.25 won marks the highest level since December 2022, when it reached 0.30 won.
SK Hynix Raised $26.5 Billion Through ADR Issuance
SK Hynix raised approximately $26.5 billion through ADR issuance on the 10th. Dollar subscription funds began depositing from the 14th. Rather than converting all the raised dollars to won at once, SK Hynix is holding some funds in dollars for future foreign currency settlements and other needs, distributing deposits across transaction banks. This has resulted in abundant short-term dollar liquidity in the banking sector.
Banks Convert Dollar Funds Through FX Swap Market
Banks receiving these dollars are converting them to won for operational purposes through the FX swap market, creating strong sell-and-buy (dollar sell, won buy) demand. With abundant dollar supply and strong won procurement demand, swap points have risen rapidly, particularly for short-term tenors.
A swap dealer at a securities firm stated, "There has been steady sell-and-buy demand previously, and swap points sometimes rise at year-end due to supply and demand, but now is not a period with year-end special factors." The dealer added, "The current movement appears to be significantly influenced by SK Hynix-related supply and demand," and noted that the narrowing Korea-US interest rate differential may also be a factor, evaluating the short-term tenor's positive conversion as unusual.
FAQ
What caused FX swap points to rise on the 27th?
FX swap points rose sharply following large-scale dollar supply related to SK Hynix's ADR issuance. SK Hynix raised approximately $26.5 billion through ADR issuance on the 10th, with dollar subscription funds beginning to deposit from the 14th. As banks converted these dollars to won through the FX swap market, strong sell-and-buy demand pushed swap points higher.
When did the 1-month FX swap point last enter positive territory?
The 1-month FX swap point last entered positive territory on June 2, 2022, when it recorded 0.05 won. The current rise to 0.05 won on the 27th marks the first positive reading in 4 years and 2 months.
