South Korea’s won-dollar trading on the first day with extended trading hours commenced smoothly, marked by ample liquidity and stable volatility, financial authorities reported Tuesday.
As of Monday, South Korea extended its won trading hours to enhance the currency’s tradability and accessibility for global investors. The new trading hours are from 9 a.m. to 2 a.m., compared to the previous 9 a.m. to 3:30 p.m. schedule.
Choi Sang-mok, Deputy Prime Minister and Minister of Economy and Finance, along with Bank of Korea Deputy Governor Ryoo Sang-dai, visited the foreign exchange dealing room at KEB Hana Bank headquarters in Seoul on Monday night to observe the first day of the extended hours.
Minister Choi emphasized that the structural overhaul of the forex market aims to align with global standards by enhancing openness and competitiveness. “The government will continue to support domestic banks to ensure the stable implementation of these changes,” he stated.
Deputy Governor Ryoo highlighted the crucial role of domestic financial institutions in preventing excessive volatility following the market’s structural improvements. “The foreign exchange authorities will also closely monitor market trends to maintain stability,” he added.
On the first day of extended trading, total spot trading volume reached $12.57 billion, including $2.46 billion traded between 3:30 p.m. Monday and 2 a.m. Tuesday, according to the finance ministry. The average trading volume per hour between 9 a.m. and 3:30 p.m. on Monday was $1.56 billion, while the figure for the extended hours was $230 million, Bank of Korea data showed.
Despite a notable decrease in trading volume during the extended hours, authorities deemed it reasonable. They noted that internationalized currencies traded 24 hours a day typically see reduced trading volumes at night.
Concerns about increased volatility were unfounded as the market maintained ample liquidity and a narrow bid-ask spread, the difference between bid and ask prices.
The nighttime opening of the foreign exchange market is part of a broader strategy to advance the domestic forex market by increasing foreign investor accessibility to bond markets, leveraging South Korea’s strong economic position.
“In the short term, both domestic and foreign investors will benefit from better market accessibility. In the long term, we expect a reduction in the price disparity between onshore and offshore exchange rates,” said Kwan Ah-min, an analyst at NH Investment & Securities.
Kwan noted that easier market access could attract funds ahead of Korea’s potential inclusion in the FTSE World Government Bond Index, a major global bond index, in September. The extended trading hours are part of the government’s reform efforts to secure this listing.
Currently, Korea and India are the only countries among the world’s top 10 economies by nominal GDP not included in the bond index.
As of 5 p.m., the Korean won weakened against the US dollar, losing 4.3 won to 1,388.8 per dollar.
