South Korea Extends Won Trading Hours in Push for MSCI Developed Market Status

South Korea initiated round-the-clock trading of the won against the U.S. dollar on Monday, a landmark foreign exchange reform designed to enhance market access for international investors and bolster the country's case for an upgrade to developed market status.

The move allows the onshore won-dollar market to operate nearly 24 hours a day on weekdays, aligning it more closely with major global currency markets like those in London and New York.

A Push for Developed Market Status

This reform is a cornerstone of South Korea's strategy to secure a reclassification in MSCI's prestigious Developed Markets Index. For years, MSCI has cited restrictions in the country's foreign exchange market as a key obstacle to an upgrade.

By extending trading hours and easing other market access rules for foreign investors, Seoul aims to address these concerns directly. Officials hope that improved accessibility will strengthen South Korea's appeal to global investors and finally achieve the coveted reclassification.

How the New System Works

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Previously, onshore dollar-won trading was largely restricted to local business hours. This forced many overseas investors to use offshore non-deliverable forwards (NDFs) to manage their currency exposure, a less efficient alternative.

The new overnight trading session will be supported by designated domestic and international banks registered to participate in the local FX market. Authorities anticipate that market liquidity will build gradually as more overseas institutions begin to use the extended hours.

Market Context and Reaction

On the first day of the new system, the won traded weaker, with the USD/KRW pair rising 0.3%, according to Investing.com. This followed a rebound for the currency late last week.

The reform comes as South Korea's equity market has seen strong performance. The benchmark KOSPI index has climbed more than 30% this year, making it one of Asia's top performers, fueled by gains in AI-related technology stocks and optimism surrounding corporate governance reforms.