What is the won-dollar cross-currency basis?

A deviation from covered interest parity, measuring how far the cost of obtaining dollars through the swap market exceeds what the interest differential alone would imply.

How does the cross-currency basis relate to covered interest parity?

Covered interest parity is the no-arbitrage condition that borrowing dollars directly must cost the same as borrowing won, hedging the currency risk fully and swapping into dollars. A persistently non-zero basis means something is preventing that arbitrage.

What does a widening cross-currency basis indicate?

That dollar funding has become scarce, or that the balance sheet capacity of the intermediaries who would run the arbitrage has contracted. It is a standard gauge of cross-border funding pressure.

KRFXCCB10

South Korean Won to U.S. Dollar 10-Year Cross-Currency Basis

Name: South Korean Won to U.S. Dollar 10-Year Cross-Currency Basis
Published: 2002-02-21
License: https://creativecommons.org/licenses/by-nc-nd/4.0/

-57.75bp

As of 2026-09-09 · Updated daily

2025-09-092026-09-09

What does the cross-currency basis measure?

In theory it should cost the same to borrow dollars directly as to borrow won, hedge the currency risk fully, and swap into dollars. The basis is the wedge between those two costs. The deeper it goes negative, the larger the premium on raising dollars through the swap market, and Korea structurally sits on the negative side.

The two lines are the paired rates, and the shaded gap between them is their difference, which is the indicator's value.

How do you read a deepening negative?

A basis deepening into negative territory signals dollar funding tightening, and the short maturities widen most sharply on acute funding stress. The longer maturities carry the structural demand imbalance more than the cycle, so reading the maturities together separates the acute signal from the structural one. A shallowing means the pressure is easing.

The gap narrows and then widens again. The narrowing and widening of the difference is itself the signal.

How does it matter for financial markets?

For those running dollar assets from a won base, hedging costs hang directly on this value, and for those able to supply dollars to the swap market it sets the reward. Read beside dollar liquidity gauges and the exchange-rate tail-risk gauge, it helps separate passing friction from a genuine dollar shortage.

When the two lines cross, the sign of the difference flips. Such sign flips are the regime turns markets watch.

Overview

The long end of the CIP-deviation term structure, the most structural, slowest-moving component.

Definition

The cross-currency basis is the deviation from covered interest parity (CIP) in the market for swapping Korean won into U.S. dollars, measured as the difference between the quoted cross-currency swap (CCIRS) rate and the won interest-rate swap (IRS) rate at the matched tenor:

\text{basis}_{t,\tau} = \text{CCIRS}^{\text{mid}}_{t,\tau} - \text{IRS}^{\text{mid}}_{t,\tau}.

Under CIP the basis is zero, and a negative basis means synthetic dollar funding carries a premium over direct borrowing (Du, Tepper, and Verdelhan 2018).

This series is the basis at the 10-year tenor, the long end of the term structure of CIP deviations and its most structural and slowest-moving component. It is reported in basis points, where a lower reading indicates tighter dollar funding.

Methodology

The basis is a direct difference of two quoted swap rates at the matched tenor, with no estimation or model layer.

(1) Mid pricing. The cross-currency interest-rate swap (CCIRS) and the won interest-rate swap (IRS) are each converted to the mid of their offer and bid quotes:

p^{\text{mid}}_{t,\tau} = \tfrac{1}{2}\left(p^{\text{offer}}_{t,\tau} + p^{\text{bid}}_{t,\tau}\right).

(2) Basis construction. The basis is defined as the CCIRS mid less the IRS mid at the same tenor:

\text{basis}_{t,\tau} = \text{CCIRS}^{\text{mid}}_{t,\tau} - \text{IRS}^{\text{mid}}_{t,\tau}.

Both legs are quoted semiannual on an Actual/365 day count, so no day-count or compounding conversion is applied.

(3) Sign and units. Under covered interest parity the basis is zero, and a negative value is the CIP deviation signalling a premium on synthetic dollar funding. The series is stored in percentage points and displayed in basis points:

\text{basis}^{\text{bp}}_{t,\tau} = 100 \times \text{basis}_{t,\tau},

so lower readings indicate tighter dollar funding.

Applications in Economics

The 10-year basis is the structural benchmark of the CIP-deviation term structure. The durable hedging flows of long-duration institutions, namely life insurers and pension funds that hold overseas assets under multi-year currency hedges, drive the long-horizon CIP deviation, and this tenor is the least sensitive to transient funding stress.

The determinants of the long-horizon basis are structural rather than cyclical. The net-foreign-asset position and the institutional hedging demand it proxies govern the long-horizon deviation (International Monetary Fund 2019), while the costly balance-sheet constraints that absorb that demand (Sushko et al. 2016) and the macrofinancial factors that dominate the cross-section of deviations at long maturities (Cerutti, Obstfeld, and Zhou 2021) act alongside it.

Because long-dated swap liquidity is thinner, the 10-year basis should be read as a slow-moving structural signal rather than a stress gauge. Together with the 1- and 5-year tenors, it completes the term-structure picture of CIP deviations.

Applications in Financial Markets

The 10-year basis reports the cost of long-dated cross-currency funding and hedging. It is the price an institution pays or receives to carry a decade-long hedge of dollar assets back into won, so it bears most directly on the economics of long-horizon overseas allocation.

Together with the 1- and 5-year tenors, it completes the term-structure view of CIP deviations. The long end measures the structural demand imbalance and the short end the cyclical funding stress, so the three maturities together describe both the level and the slope of Korea's CIP deviation (Cerutti, Obstfeld, and Zhou 2021).

Statistical Tests

Over 5968 observations from 2002-02-21 to 2026-07-01, the unit-root reading of the ten-year won-dollar cross-currency basis is ambiguous, since the Dickey and Fuller (1979) and Phillips and Perron (1988) tests reject a unit root at p = 0.0056 and p = 0.0 while the Kwiatkowski et al. (1992) test also rejects stationarity at p < 0.01, the near-unit-root disagreement of a persistent bounded signal, so no clean order is assigned. On the level the first-order autocorrelation is 0.989 with an implied half-life of about 60.5 observations, a descriptive persistence summary and not an integration claim, the Ljung and Box (1978) portmanteau on the level rejects white noise at lags 10 and 20, Q = 53223.90 and Q = 98818.50 at p = 0.000 and p = 0.000, and the Bai and Perron (1998) procedure, by the Bai and Perron (2003) algorithm, finds 2 breaks in the mean at 2007-11-13, 2013-08-23 (Andrews 1993; Perron 1989).

This signal, the ten-year won-dollar cross-currency basis, has no daily seasonal period, so the seasonal-unit-root and seasonal-stationarity machinery of Hylleberg et al. (1990) and Canova and Hansen (1995) is deliberately not run (Beaulieu and Miron 1992; Ghysels and Osborn 2001).

Key Figures

Key Figures — South Korean Won to U.S. Dollar 10-Year Cross-Currency Basis
Latest (bp)	-57.75 (2026-09-09)
Change from previous	−1.75 (2026-09-08)
Change over one year	−6.00 (2025-09-09)
Highest on record	23.50 (2023-01-11)
Lowest on record	-296.50 (2011-10-05)
Period covered	2002-02-21 – 2026-09-09
Observations	6030

Recent observations
Date	Value (bp)	Change
2026-09-09	-57.75	−1.75
2026-09-08	-56.00	−1.00
2026-09-07	-55.00	+0.50
2026-09-04	-55.50	−1.25
2026-09-03	-54.25	+1.25
2026-09-02	-55.50	−0.50
2026-09-01	-55.00	−1.75
2026-08-31	-53.25	+1.25
2026-08-28	-54.50	−2.75
2026-08-27	-51.75	+2.00
2026-08-26	-53.75	+2.75
2026-08-25	-56.50	−0.75

Frequently Asked Questions

What is the won-dollar cross-currency basis?: A deviation from covered interest parity, measuring how far the cost of obtaining dollars through the swap market exceeds what the interest differential alone would imply.
How does the cross-currency basis relate to covered interest parity?: Covered interest parity is the no-arbitrage condition that borrowing dollars directly must cost the same as borrowing won, hedging the currency risk fully and swapping into dollars. A persistently non-zero basis means something is preventing that arbitrage.
What does a widening cross-currency basis indicate?: That dollar funding has become scarce, or that the balance sheet capacity of the intermediaries who would run the arbitrage has contracted. It is a standard gauge of cross-border funding pressure.