How 24-hour FX trading could reshape Korean won

Exchange rate displays at a currency exchange booth in Myeong-dong in Seoul on Sunday show the won-dollar exchange rate remains elevated. Yonhap

Korea’s 24-hour won-dollar trading, set to launch Monday, is expected to reshape market dynamics as the local currency remains under pressure, with the exchange rate staying above the psychologically important 1,500-per-dollar level for more than 30 consecutive days, analysts said Sunday.

While the extended trading hours could fuel greater volatility in the near term, analysts expect the move to improve access for foreign investors and deepen integration with global financial markets over time, laying the groundwork for a more stable exchange rate.

Won-dollar trading in Seoul’s foreign exchange market will run from 6 a.m. Monday to 6 a.m. Saturday during U.S. daylight saving time (DST), effectively extending trading on a near 24-hour schedule and significantly lengthening hours from the previous 9 a.m. to 2 a.m. weekday regime.

Outside the DST period, hours will shift to 7 a.m. Monday to 7 a.m. Saturday.

Dollar trading will also continue on public holidays unless they fall on weekends.

Trading in nondollar currencies will remain unchanged at 9 a.m. to 3:30 p.m.

Just a year ago, the won was trading in the 1,300 range against the dollar. But the currency has weakened by nearly 6 percent against the dollar this year, with foreign investors selling more than 156 trillion won ($102 billion) of domestic equities, according to Bank of Korea data.

The exchange rate briefly breached the 1,500 level in March for the first time since 2009 on heightened Middle East tensions before easing back into the low 1,400 range. It returned above 1,500 in mid-May and has remained elevated since, holding above that level for 34 consecutive trading days based on weekly closing prices, as of Friday.

The move to a 24-hour trading cycle is drawing mixed views from experts, who point to both stabilizing benefits and potential risks.

Previously, global developments occurring after the 2 a.m. close would hit the domestic market at the 9 a.m. opening, often triggering sharp swings in the won. The round-the-clock trading is expected to allow the market to absorb external shocks in real time, smoothing morning volatility.

However, some analysts warn that continuous exposure to global markets could backfire during overnight hours. With lower trading volumes expected, thin liquidity could leave the won vulnerable to sudden short-term swings from external shocks.

“Real-time exposure to shocks and thin overnight liquidity will require a completely different level of risk management capability from market participants compared to the past,” Choi Kyu-ho, an analyst at Hanwha Investment & Securities, said.

Still, many analysts expect the transition to a 24-hour market to anchor medium- to long-term stability for the won by providing seamless real-time liquidity for global investors and corporate hedgers during overnight hours.

They said the expanded trading window could unlock fresh inflows from foreign asset managers and institutional investors previously constrained by time zone barriers, creating a structural buffer for the currency.

“With 24-hour operations, foreign retail investors seeking won liquidity for Korean equity investments can seamlessly enter the market, creating a new and steady source of demand,” Seo Jeong-hoon, senior research fellow at Hana Bank, said.

Lim Hwan-yeol, senior researcher at Woori Bank, noted, “If overnight liquidity provision becomes structurally entrenched, it will significantly enhance medium- to long-term exchange-rate stability.”