South Korea Launches 24-Hour Won Trading to Boost Global Investor Access

South Korea on Monday initiated nearly 24-hour trading of the won against the U.S. dollar, marking one of the country's most significant foreign exchange market reforms in decades as it seeks to attract more overseas capital.

The move allows the onshore won-dollar market to operate almost continuously, aligning it more closely with major global currency markets in London and New York. This change is expected to improve market accessibility for international investors who previously faced significant hurdles trading the currency outside of local Asian business hours.

Implications for Investors

Previously, foreign investors were largely restricted to onshore trading during South Korean business hours. To manage currency exposure overnight, many had to rely on the offshore non-deliverable forwards (NDFs) market. The new extended hours will be supported by designated domestic and international banks registered to participate in the local FX market, with authorities expecting liquidity to build gradually as more institutions join.

This reform is a key component of a broader government package designed to modernize the country's capital markets and ease access requirements for foreign investors.

Push for Developed Market Status

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Seoul's currency reform is a critical step in its long-standing campaign to have its equity market upgraded to the MSCI Developed Markets Index. Index provider MSCI has consistently cited restrictions in South Korea's foreign exchange market as a primary obstacle to reclassification. By addressing this key concern, officials hope to strengthen the country's case for the upgrade.

The reforms come as South Korea's equity market sees strong performance. The benchmark KOSPI index has climbed more than 30% this year, making it one of Asia's top performers, driven by gains in semiconductor stocks and optimism surrounding corporate governance reforms.

Market Reaction

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