[Edaily Reporter Seong Joowon ] Deep within the government complex in Sejong City, officials from the Ministry of Finance and Economy are monitoring every move of the won’s exchange rate from a room known as “the box.” With the won’s value plummeting to its lowest level in 17 years and posting the worst performance among Asian currencies in the first half of this year, the tension in this room is particularly high, Bloomberg reported on the 3rd.

Starting on the 6th, the won will be traded 24 hours a day for the first time in history. This marks a significant relaxation of controls on the won and a departure from the existing policy stance rooted in the trauma of the 1997 foreign exchange crisis. Accordingly, preparations on the ground are in full swing, including an increase in staff and improvements to the work environment.

Trading Hours Expanded from 17 to 24 Hours…A Move Aimed at Inclusion in the MSCI Developed Markets Index

Currently, the won is traded for only 17 hours a day, excluding a 7-hour period from 2:00 a.m. to 9:00 a.m. Korea Standard Time. Starting on the 6th, the won will be traded non-stop from Monday morning through Saturday morning. Authorities are also pushing forward with measures such as introducing hourly reference rates, relaxing reporting requirements for foreign investors, and allowing offshore won spot trading starting next year.
These measures are key requirements for South Korea’s bid to be included in the MSCI Developed Markets Index. Moon Ji-sung, Director General for International Economic Affairs (Deputy Minister) at the Ministry of Finance and Economy, stated, “This is not merely regulatory reform but a core infrastructure that will enable the South Korean capital market to achieve the level of accessibility and convenience found in developed markets.”
Claire Huang, Chief Asia Macro Strategist at Amundi Asset Management, said, “To ensure won trading is as smooth as that of the Group of Ten (G10) currencies, it is necessary to secure liquidity across extended trading hours.”

Won Hits 17-Year Low, KOSPI Up 90%…‘Mismatch’

The issue is the timing. The won has recently been trading at around 1,540 won per dollar, falling more than 6% since the start of the year. It has already broken through the 1,400-won mark, which President Lee Jae-myung had previously cited as a warning sign of broader economic pressure.
In contrast, buoyed by the artificial intelligence (AI) boom, the KOSPI has surged by about 90% since the start of the year, posting the strongest growth rate among major global stock markets. SamsungElectronics(005930)and SK hynix(000660)have risen to become companies with market capitalizations in the trillions of dollars, and exports are also hitting record highs. The current account surplus in April was approximately $28 billion (about 42.885 trillion won), the highest on record.
The disconnect between economic fundamentals and the currency’s value stems from changes in the structure of capital flows. Although South Korea posted a current account surplus of $102.7 billion from January through April of this year, more than $60 billion in capital flowed out due to foreign direct investment and purchases of foreign securities, and foreign investors made net sales of approximately $43.6 billion in Korean stocks. In effect, the country is becoming a “capital exporter,” earning dollars through trade but failing to reinvest them domestically, as the funds instead flow overseas.
Although the impact has somewhat diminished this year, “the National Pension Service’s expansion of overseas investments” and “concerns over the Korea-U.S. trade agreement”—under which South Korea agreed to invest $350 billion in the U.S.—are also cited as factors contributing to the won’s weakness.

Expectations for Resolving NDF Arbitrage… Banks Expand London Dealing Rooms

One of the key reasons for introducing 24-hour trading is to

resolve arbitrage

through the Non-Deliverable Forward (NDF) market. Until now, when the onshore market closed, investors have used NDFs to hedge their won exposure; however, there have been many concerns that arbitrage targeting price differences between the offshore and onshore markets has increased volatility.
Woori Bank secured a UK license in late May to support won trading and investment outside of Korean market hours, and major banks are also expanding their dealing teams in London and Seoul. Ed Al-Hussein, a portfolio manager at Columbia Threadneedle in New York, predicted, “We will see increased participation from investors seeking CARRY trade opportunities.”

Lessons Learned from the ‘1997 Crisis’… “No More Dollar Shortages”

The background to these measures lies in the lessons learned from the 1997 foreign exchange crisis. At that time, the value of the won plummeted by half in just two months, and South Korea was pushed to the brink of national default. Ryu Chang-beom, a former foreign exchange trader at Bank of America and JPMorgan Chase, recalled, “The won plummeted by more than 10% in a single day, and the volatility even exceeded 20% at times,” adding, “I was truly afraid the country would collapse.”
Since then, South Korea has significantly expanded its foreign exchange reserves—which once amounted to only four to five days’ worth—and strengthened currency controls through measures such as trading hour restrictions, intra-regional settlements, and designated bank transactions. It currently holds foreign exchange reserves among the largest in the world.
Experts are focusing on the potential for increased volatility during the early stages of market liberalization. Son Beom-gi, an economist at Barclays, pointed out, “As market openness increases, volatility may also rise.” Lee Seung-heon, former Deputy Governor of the Bank of Korea, advised, “The foreign exchange authorities must move away from the mindset that the market needs to be tightly controlled and first dismantle the mechanisms that hinder trading.”