South Korea officially extended the trading hours for the Korean won (KRW) against the U.S. dollar on July 1, 2024, shifting from a market that closed at 3:30 p.m. to one that remains active until 2:00 a.m. the following day. This change, implemented by the Ministry of Economy and Finance and the Bank of Korea, aims to modernize the nation’s foreign exchange infrastructure and improve accessibility for global investors.
Why did South Korea extend trading hours?
The primary driver for this shift is the government’s desire to gain inclusion in the World Government Bond Index (WGBI) managed by FTSE Russell. According to the Ministry of Economy and Finance, the previous restricted trading hours were a major barrier for international investors who operate in different time zones. By aligning the won’s trading window with the London market’s closing time, authorities expect to increase market liquidity and reduce transaction costs for foreign participants.
Prior to this change, the won-dollar market was limited to the domestic business day, often causing volatility when external economic data was released while the Seoul market was closed. The Bank of Korea anticipates that the extended hours will allow for more efficient price discovery and better integration with global financial hubs.
How the new system works
The market now operates from 9:00 a.m. to 2:00 a.m. KST. This extended window covers the entirety of the Asian trading session and the majority of the European trading session. To facilitate this transition, the government introduced several structural reforms:
- Registered Foreign Institutions (RFIs): Financial institutions based outside of South Korea can now participate directly in the domestic interbank market after registering with the authorities.
- Centralized Infrastructure: The Korea Exchange (KRX) has overhauled its electronic trading systems to handle the increased volume and extended duration of activity.
- Settlement Procedures: The settlement window has been synchronized to ensure that trades executed during the late-night hours are processed efficiently alongside standard daytime transactions.
Market impact and historical context
This move marks the most significant reform to the Korean foreign exchange market since the 1997 Asian Financial Crisis, when the country moved toward a floating exchange rate system.
Historical data from the Korea Exchange indicates that the won was previously one of the most restricted major currencies in terms of offshore trading accessibility. By contrast, other major economies like Japan and Australia have maintained 24-hour, highly liquid currency markets for decades. Economists observe that this reform effectively removes the "Korea discount"—a phenomenon where Korean assets were historically undervalued due to limited market openness and geopolitical risks.
What happens next?
The government is currently monitoring the impact of the extended hours on market volatility and liquidity. If the transition proves successful, it will likely serve as a prerequisite for the potential inclusion of Korean government bonds in global indices later in the year. Investors and traders are watching closely to see if the increased access leads to higher trading volumes from European and American institutional desks. The Ministry of Economy and Finance has stated that it will continue to review the market infrastructure to ensure that the extended hours remain stable for all participants.
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