Foreign exchange turnover among banks in South Korea dropped in the third quarter as the currency's lop- sided ascent to the US dollar reduced demand for FX trading, central bank data showed Thursday.

Daily average FX trading volume by domestic banks and local branches of foreign banks, including inter-bank and bank-to- customer FX transactions, reached $43.4 billion in the third quarter, down $5.74 billion, or 12 percent, from three months earlier, according to the Bank of Korea (BOK).

The sharp fall came amid the South Korean won's appreciation against the dollar that led to lower demand for FX transactions.

The won/dollar exchange rate fell to 1,054.8 won to the dollar, nearing to this year's low of 1,054.3 won, during the Wednesday trading before rising to close at 1,056.4 won after the estimated intervention into the market by the FX authorities.

Around a month earlier, the FX authorities made a joint verbal intervention into the market, saying that the recent movement of the won/dollar exchange rate was excessive and one-sided.

The US Treasury said in its latest FX report that South Korea should refrain from intervening into the FX market, but Seoul reportedly said it will maintain its policy stance of conducting smoothing operation to curb one-sided movement.

The daily turnover of FX spots sank 14.5 percent in the third quarter from three months earlier, and the figure for FX forward contracts declined 7 percent.

Daily trading volume for FX swaps shrank 10.2 percent in the third quarter, and the reading for currency swaps dropped 22.5 percent.