South Korea’s currency market is set to embark on a significant transformation, with the won opening to a 24-hour trading cycle from July 6. Banks began trialling the system this week, a move that veterans like Namkoong Taehun, an 18-year currency trading veteran at Hana Bank, describe as “daunting.” This transition marks a dramatic reversal from decades of tight currency controls, which were initially established following the won’s collapse during the 1997 Asian Financial Crisis. The change is poised to drastically alter the landscape for FX teams, who historically operated within a narrow 9-to-3 trading window.
Seoul’s primary objective behind this liberalisation is to secure a coveted “developed market” designation from index provider MSCI, aiming to elevate the country’s profile among global investors and eliminate the persistent “Korea Discount.” However, the “always-on” won presents clear risks. The currency currently hovers near a 17-year low against the US dollar, making it particularly susceptible to thin liquidity pockets that could trigger disproportionately large price swings. Ironically, the benchmark KOSPI share index’s record-breaking rally this year has reinforced won weakness, as overseas funds engage in significant selling to book profits.
To mitigate potential liquidity gaps and trading disruptions, a series of reforms have been introduced. These include permits for offshore investors to hold and trade the currency, an offshore won settlement system, and an overdraft policy. This direct holding capability for foreign financial institutions is a key shift from previous restrictions. In anticipation of the round-the-clock demands, banks are adjusting operations; Hana Bank, the country’s biggest forex bank by trading volume, plans to add three more staff to its three-shift schedule, while Woori Bank will double its UK-based team. Despite these efforts, MSCI recently maintained South Korea’s emerging market status, citing ongoing accessibility issues and insufficient onshore liquidity.
