South Korea started extended, nearly 24-hour trading of the won versus the U.S. dollar on Monday, marking what officials describe as a significant overhaul of the country's foreign exchange market rules. The move brings the onshore dollar-won market closer to the continuous operating hours typical of major global currency centres and gives international investors the ability to trade the won outside traditional Asian business hours.
The expanded sessions are intended to address a long-standing concern cited by MSCI in its assessment of South Korea's market classification. Restrictions on foreign exchange trading have been a prominent reason MSCI has hesitated to reclassify South Korea as a developed market. Extending trading hours was one of the specific measures recommended to improve market accessibility for global investors.
Market behaviour on the first day of the new schedule showed the won trading softer, with the USD/KRW pair rising 0.3% on Monday. That move followed a rebound late last week from the won's weakest position versus the dollar since 2009. The earlier weakness and subsequent recovery were linked in media reports to anticipated currency flows related to SK Hynix Inc's (KS:000660) planned American Depositary Receipt offering.
Until now, onshore dollar-won transactions were largely confined to local business hours, which pushed many foreign investors to manage currency exposure through offshore non-deliverable forwards. With the newly expanded schedule, traders can execute onshore transactions during a much broader span of the global trading day.
Authorities have set up an overnight session supported by a combination of designated domestic lenders and international banks that are registered to operate in the local foreign exchange market. Officials expect liquidity to build over time as a greater number of overseas institutions register and participate. As part of the reform package, the government has also relaxed some market access requirements for foreign investors in an effort to accelerate participation.
The launch of extended trading hours is one facet of a wider initiative to modernize South Korea's capital markets. The KOSPI has risen by more than 30% this year, making it one of the stronger-performing major Asian equity markets. That advance has been driven in part by AI-related gains among major chipmakers as well as by investor optimism about corporate governance changes.
Officials say that making foreign exchange trading easier for non-domestic investors should enhance South Korea's attractiveness to global capital and support the country's case for being reclassified as a developed market. Observers will be watching whether the combination of extended hours, eased access rules and growing liquidity is sufficient to satisfy benchmark index criteria.
Reporting note: The information in this article reflects official policy changes and market moves disclosed by South Korean authorities and market activity observed on the first trading day under the expanded hours.