Starting on the 6th, won-dollar transaction will be available around the clock in Korea's foreign exchange market. Until last week, transactions were only possible from 9 a.m. on weekdays to 2 a.m. the next day, but trading hours are being greatly expanded. As a result, retail investors buying U.S. stocks before dawn can exchange currencies at real-time rates, and export-import corporations can immediately respond to nighttime exchange-rate volatility.
This measure is part of the government's effort to join the MSCI developed markets index. Korea is currently included in the MSCI emerging markets index. In its annual market classification, MSCI has cited "the difficulty of converting the won" as a reason for not including Korea in the developed markets index.
Converting the won is difficult because the won is not a currency that is frequently traded internationally like the U.S. dollar or the Japanese yen, and Korea's foreign exchange market does not operate 24 hours. Since switching from the market-average exchange rate system to a free-floating exchange rate system in Dec. 1997, foreign exchange transaction hours have been limited to about six to seven hours a day. Due to the trauma of the foreign exchange crisis, the government maintained a management system that controls foreign exchange inflows and outflows.
To invigorate won transactions, the government expanded foreign exchange transaction hours from 9 a.m. to 2 a.m. the next day starting in July 2024. Beginning that day, won-dollar transactions will also be possible from 2 a.m. to 9 a.m., which had remained a gap in trading. However, currencies other than the dollar can only be traded from 9 a.m. to 3:30 p.m.
Spot foreign exchange brokers such as Seoul Money Brokerage will provide a time-weighted average price (TWAP) at the top of each hour while the foreign exchange market is open. They will also disclose the opening, high and low exchange rates from 6 a.m. to 6 a.m. the next day.
Meanwhile, on the first day of 24-hour trading in the foreign exchange market, the won-dollar exchange rate started trading at 1,527.70 won as of 6:11 a.m., up 2.1 won from the previous day.