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Young-Kyu Kim, head of FX and derivatives sales at Hana Bank, discusses FX management in Asia through 2025 amid escalating US-China tensions.
Global Finance: While geopolitics is arguably the number one concern for companies in the US and Europe, what is keeping Asian companies up at night at the moment when it comes to FX markets?
Young Kyu Kim: Geopolitics is also a growing concern for Asian companies. The forex market is affected by the Middle East war and the potential escalation of tensions between the United States and China after Trump’s victory, which creates a great deal of volatility such as economic conditions and interest rate gap between countries.
In line with the Korean foreign exchange authorities’ structural improvement policy in preparation for global corporate investments in Korea, Hana Bank opened the Hana Infinity Seoul room for 24-hour trading. Starting with the new center in Seoul, Hana opened Infinity London to cater to non-resident KRW FX trades. A new trading room called Hana Infinity Singapore is set to open for Asian clients. Ultimately, it aims to provide enhanced 24-hour services on major forex markets at local times.
gf: In general, are clients seeking more reserves beyond traditional G5 currencies?
Kim: In response to the increase in transactions in CNH, IDR, SAR, etc., amid strong growth in Asian countries, Korea has taken preventive measures such as allowing local currency transactions in Indonesian Rupiah.
On the corporate side, there is a demand to diversify currency holdings due to foreign exchange hedging, global inflation, and other reasons.
However, they hold currencies around the US dollar rather than non-G5 currencies (USD, ERU, JPY, GBP, CHF). We believe that this is due to Korea’s high dependence on the United States. In particular, the recent significant fluctuation in the exchange rate of the Korean won against the US dollar has led to companies signing contracts in US dollars, rather than in the local currency.
gf: In today’s fast-paced FX environment, how can financial institutions help enhance corporate risk management and digital innovation?
Kim: Hana Bank plays a pivotal role in the Northeast Asian foreign exchange market, thanks to its involvement in a wide range of markets, including trade financing and foreign exchange swaps between the South Korean won, Japanese yen and Chinese yuan, and offering diverse products. In particular, we offer foreign exchange risk management solutions that suit corporate clients seeking to hedge the risks of exchange rate fluctuations. We also provide them with financing keeping in mind their liquidity situation in a bid to help in managing money in an optimal manner.
Based on its experience in foreign exchange markets and trade, Hana Bank is strengthening its presence in emerging economies (Vietnam, Indonesia, etc.) to provide foreign exchange services to corporate clients. In line with the digital transformation of the Forex market, we have developed and positioned our own Forex platform, which is now expanding into the global market. Besides, we offer API-based banking services tailored to suit the unique situations of customers in an effort to provide the perfect products that meet their various needs.
gf: As in other areas of corporate banking, are customers increasingly looking for tailored offers? How do you meet these demands?
Kim: The global foreign exchange market turns into a trading platform without physical or time restrictions. Among electronic methods, application programming interfaces (APIs) provide corporate clients with customized foreign currency data including exchange rate information. The API service allows clients to conduct transactions using their ERP system or internal software by connecting the API to the FX platform. By leveraging Application Programming Interfaces (APIs), companies can obtain real-time exchange rate information according to their FX risk profile and execute FX transactions anytime they want.
gf: How does artificial intelligence – and other cutting-edge technologies – play into this?
Kim: Foreign exchange transactions have long been dependent on the capabilities of traders and the flow of foreign currency to customers. But now AI is reshaping the Forex market: there are a growing number of future trading offerings powered by AI, algorithmic and designed using innovative technologies such as blockchain. These changes have reduced the time it takes to trade and created higher quality financial products and trading skills.
Under these circumstances, Hana Bank is focusing on developing AI-based exchange rate forecasting models as part of efforts to provide tailored advisory services, including Robo Advisor. We expect that the automation of foreign exchange trading will increase the volume of transactions, which will contribute to providing abundant liquidity in foreign currencies.