South Korea Launches 24-Hour Won Trading to Vie for Developed Market Status

South Korea has launched nearly 24-hour trading for its currency against the U.S. dollar, a landmark foreign exchange reform aimed at improving access for global investors and bolstering its long-standing bid for developed-market status. The new system, which began Monday, is one of the country's most significant market structure changes in decades.

A Major Overhaul of FX Trading

The reform extends the onshore Korean won-dollar trading window from its previous limitation of local business hours to a nearly continuous session. This change is designed to bring Seoul's currency market more in line with other major global financial centers like London and New York, allowing overseas investors to trade the won outside of Asian business hours.

Previously, international investors were often forced to use 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 institutions participate.

Targeting a Developed Market Upgrade

This initiative is a critical component of South Korea's strategy to be reclassified in major global equity benchmarks. Index provider MSCI has consistently cited restrictions in the foreign exchange market as a primary obstacle to upgrading South Korea from an emerging to a developed market.

Ad

By addressing these long-standing concerns, Seoul hopes to strengthen its case for reclassification. The extended trading hours are part of a broader package of reforms that also includes easing market access requirements for foreign investors.

Market Impact and Context

On its first day, the won traded weaker, with the USD/KRW pair rising by 0.3%. The move followed a rebound late last week from the currency's weakest point against the dollar since 2009.

The currency reform is part of a wider government push to modernize South Korea's capital markets. These efforts have contributed to strong equity performance, with the benchmark KOSPI index climbing more than 30% this year, making it one of Asia's top performers. Officials anticipate that improved FX accessibility will further increase the market's appeal to international capital.