South Korea Launches 24-Hour Won Trading to Boost Developed Market Bid

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

A Major FX Market Overhaul

The reform extends the onshore won-dollar trading window from its previous limitation of local business hours to a nearly continuous session. This change aligns South Korea's currency market more closely with global financial centers, allowing overseas institutions to trade the won outside of Asian hours.

Previously, foreign investors often had to rely on offshore non-deliverable forwards (NDFs) to manage their currency exposure. The new overnight session will be supported by designated domestic lenders and registered international banks, with authorities expecting liquidity to build gradually as more participants join.

Bid for Developed Market Status

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This initiative is central to South Korea's push to be upgraded to the MSCI Developed Markets Index. The index provider has historically cited restrictions in the country's foreign exchange market as a primary obstacle to reclassification.

By implementing longer trading hours and easing other market access requirements, the government aims to address these concerns directly. Officials hope that improved access will bolster South Korea's appeal to global investors, complementing a stock market that has seen significant gains. The benchmark KOSPI index has climbed more than 30% this year, driven by optimism over corporate governance reforms and a global AI boom boosting its key semiconductor firms.

Initial Market Reaction

On the first day of the extended hours, the South Korean won traded slightly weaker. The USD/KRW pair rose 0.3%, according to Investing.com, following a rebound for the currency late last week from its weakest level against the dollar since 2009.