South Korea Launches 24-Hour Won Trading in Push for MSCI Upgrade

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 accessibility for global investors and bolster the country's bid for inclusion in major developed-market equity indexes.

A Major FX Market Overhaul

The move extends the onshore won-dollar trading window from being limited to local business hours to a near-continuous 24-hour session, aligning it more closely with global financial centers. Previously, international investors often had to rely on offshore non-deliverable forwards (NDFs) to manage their currency exposure outside of Korean trading hours.

The new overnight trading session will be supported by designated domestic lenders and international banks registered to participate in the local FX market. According to reports, authorities anticipate that liquidity in the extended hours will build gradually as more overseas institutions join.

Targeting Developed Market Status

This reform is a cornerstone of South Korea's long-standing effort to be upgraded to 'developed market' status by index provider MSCI. The index provider has consistently cited restrictions in the country's foreign exchange market, such as the limited trading window, as a primary obstacle to reclassification from its current 'emerging market' status.

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The government has also implemented other measures, including easing market access requirements for foreign investors, as part of a broader package to modernize its capital markets and attract global investment.

Market Reaction and Context

In the first session under the new rules, the won traded weaker against the dollar. The USD/KRW pair rose 0.3% on Monday, according to market data. The currency had rebounded late last week from its weakest level against the dollar since 2009.

The reform comes amid a strong year for South Korean equities. The benchmark KOSPI index has surged more than 30% this year, making it one of Asia's best-performing major markets, buoyed by AI-related gains in heavyweight chipmakers and optimism over corporate governance reforms.