South Korea Launches 24-Hour Won Trading in Push for Developed Market Status

South Korea began near 24-hour trading of the won against the U.S. dollar on Monday in one of its most significant foreign exchange market reforms in decades. The move is a key part of the government's strategy to enhance market accessibility for international investors and bolster its long-standing bid for inclusion in major developed-market equity indexes.

A Major Overhaul of FX Trading

The reform extends the onshore won-dollar trading window from its previous limitation of local business hours to a nearly continuous session. This change allows overseas institutions to trade the currency directly during their own market hours, aligning South Korea more closely with global financial centers.

Previously, foreign investors often had to rely on offshore non-deliverable forwards (NDFs) to manage their currency exposure outside of Seoul's trading day. The new overnight session will be supported by designated domestic and international banks registered to participate in the local FX market. Authorities expect liquidity in the extended hours to build gradually as more institutions join.

Bid for Developed Market Status

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This initiative is central to South Korea's campaign to be upgraded to MSCI's Developed Markets Index. The index provider has historically cited restrictions in the country's foreign exchange market as a primary obstacle to reclassification. By expanding trading hours and easing other market access rules, Seoul is directly addressing these concerns.

Officials hope that a more accessible FX market will make South Korean assets more attractive to global investors. The reform complements other efforts to modernize the nation's capital markets, including a push for better corporate governance that has helped propel the benchmark KOSPI index up more than 30% this year, making it one of Asia's top performers.

Market Reaction

On the first day of the new trading regime, the won traded weaker against the dollar. The USD/KRW pair rose 0.3%, according to Investing.com data. The move followed a rebound for the currency late last week from its weakest level against the dollar since 2009.