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

South Korea began round-the-clock trading of the won against the U.S. dollar on Monday, a landmark foreign exchange reform designed to enhance market accessibility for global investors. The move is a critical component of Seoul's long-standing effort to have its equity market reclassified to developed status.

A Landmark Market Overhaul

The new system allows the onshore won-dollar market to operate nearly 24 hours a day on weekdays, aligning it more closely with major global currency hubs. Previously, onshore trading was largely restricted to South Korea's local business hours, which compelled many overseas investors to use offshore non-deliverable forwards (NDFs) to manage their currency exposure.

According to the plan, designated domestic lenders and registered international banks will support liquidity during the new overnight session. Authorities reportedly expect participation and trading volumes to build gradually as more overseas institutions adapt to the extended hours.

The Drive for Developed Market Status

This reform is central to South Korea's campaign for inclusion in MSCI's Developed Markets Index. For years, the index provider has cited restrictions in the country's foreign exchange market as a key obstacle to upgrading it from its current emerging market classification.

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Longer trading hours and other recently implemented measures, such as easing market access requirements for foreign investors, directly address these concerns. Officials hope that modernizing the country's capital markets will bolster its appeal and strengthen its case for reclassification.

Market Context and Reaction

On the first day of extended trading, the won traded weaker, with the USD/KRW pair rising by approximately 0.3%. This followed a rebound for the currency late last week from its weakest level against the dollar since 2009, a recovery attributed by media reports to anticipated currency flows from a planned offering by chipmaker SK Hynix Inc.

The currency reform comes amid a strong year for South Korean equities. The benchmark KOSPI index has climbed more than 30% this year, making it one of Asia's top-performing major markets, buoyed by gains in technology stocks and optimism surrounding corporate governance reforms.