South Korean banks' foreign exchange trading volume grew 7.8 percent in the first quarter from three months earlier amid growing demand for foreign currency transactions caused by brisk external trade such as exports and imports, the central bank said Wednesday.

The daily average foreign exchange turnover in the inter-bank market amounted to 22.45 billion U.S. dollars during the January- March period, up 7.8 percent from three months before, according to the Bank of Korea (BOK).

The growth was ascribable to continued growth in external trade. South Korea's trade volume breached the landmark 1 trillion dollar last year for the first time in its history, and the volume was widely expected to top the mark this year.

Reflecting rising demand for foreign currency in the real economy, the daily turnover of spots reached 10.21 billion dollars in the first quarter, up 12.9 percent from the previous quarter. The trading volume of FX swaps expanded 4.1 percent to 10.61 billion dollars, but the volume of foreign exchange forwards trading dropped 12.5 percent to 70 million dollars.

Local companies took net long position worth 6.8 billion dollars in the three months ending March 31 in the forwards market, a turnaround from 700 million dollars of net short position three months before. The turnaround came as local importers such as crude oil refiners took larger long positions in the market amid higher oil prices.

As for non-deliverable forwards (NDF) transaction, offshore traders logged net buying positions worth 890 million dollars in the first quarter, down from 7.38 billion dollars of net buying positions. The reduction was attributed to massive selling of the forward contracts amid easing worries about Europe's debt crisis.

Meanwhile, the dollar/won foreign exchange volatility came in at 0.35 percent in the first quarter, the lowest since the fourth quarter of 2007 when the volatility fell to 0.27 percent. The BOK attributed the lower volatility to easing concerns over the European fiscal crisis and reducing geopolitical risks on the peninsula.