S. Korea vows to ease access to won, eyes 'freely convertible currency'

Lead

South Korea has officially launched 24-hour foreign exchange trading for the won, a move officials say is central to the country's efforts to open its financial markets and internationalize its currency. The new system began operating on a Monday, allowing trading to run without a break from 6 a.m. Monday to 6 a.m. Saturday, closing only on weekends and the first day of each year.

Finance Minister Koo Yun-cheol visited the dealing room of Hana Bank in central Seoul to mark the occasion, calling the launch a reflection of confidence in the country's economic fundamentals and a reform measure responding to growing demand from foreign investors. "This is the starting point for the won's global leap," Koo said, according to reports from both Yonhap and the South China Morning Post. He described the new system as core infrastructure that provides the level of accessibility and convenience in foreign exchange trading comparable to advanced markets.

The won was stable against the dollar on its first day of 24-hour trading, inching higher before easing 0.1 percent to 1,531.40 against the U.S. dollar, according to the South China Morning Post. The newspaper noted that the launch is the centerpiece of a years-long effort to improve foreign access to local markets and bolster the case for an upgrade to MSCI's developed-market index.

Coverage Comparison

Coverage of the development shows a mix of optimism and caution. The South China Morning Post framed the launch positively, describing it as a milestone and a "global leap" for the won. Yonhap's reporting on the launch similarly highlighted the benefits for foreign investors and the government's confidence in the economy.

However, one Yonhap analysis piece struck a more cautious tone, warning that opening the market around the clock does not by itself make it safer. The piece argued that the reform addresses a long-standing weakness in Korea's foreign exchange system—the fact that most won trading took place offshore—but cautioned that assuming the new system will stabilize the won is a "costly illusion."

Other Yonhap reports focused on the government's broader internationalization roadmap and its outreach to investors in London and Singapore, as well as its call for exporters to help stabilize the market.

Key Claims

The reform addresses a long-standing weakness in Korea's foreign exchange system, according to the Yonhap analysis. For years, the domestic market closed while global investors continued trading the won through offshore non-deliverable forward (NDF) markets in London, New York, and Singapore. By the time Seoul reopened, overseas price movements had already dictated the day's starting point. According to the Bank for International Settlements, cited in the same article, roughly 80 percent of won-forward trading last year took place through offshore NDF markets, compared with a global average of 21 percent.

The won-dollar exchange rate has hovered in the mid-1,500s for more than a month, as noted in the Yonhap analysis and in a separate report on the government's meeting with exporters. Second Vice Finance Minister Huh Chang said during that meeting that the won, which had weakened to around 1,550 won against the greenback, had since recovered to the upper 1,400-won range, supported by exporters' efforts.

The government has called on exporters to play a proactive role in stabilizing the foreign exchange market, including converting export proceeds into the Korean won and bringing overseas retained funds back into the country. During a meeting with officials from major exporters, including Samsung Electronics, SK hynix, and Hyundai Motor Group, Huh asked companies to cooperate in addressing recent volatility. The companies agreed that a stable foreign exchange environment helps ease uncertainties and pledged to support the government's efforts.

The internationalization of the Korean won is a key task in the government's efforts to advance the country's foreign exchange and financial markets, according to ministry officials. At a task force meeting, Second Vice Finance Minister Huh Chang noted that the country intends to fundamentally reform its foreign exchange policies, which have been maintained since the 1997 economic crisis. The government plans to transform the won into a "freely convertible currency" from its current status as a "restricted currency."

The government unveiled a roadmap for internationalization in July, which defines the goal as creating an environment in which foreigners face no barriers to obtaining or using the won outside South Korea. The roadmap includes plans to improve foreign exchange regulations and market practices, build on the launch of 24-hour trading, and establish infrastructure to help foreign investors trade, hold, and make payments in the currency.

Deputy Minister Moon Ji-sung, for international affairs, shared the economic growth vision and the roadmap with investors in London and Singapore earlier this week, meeting with representatives of major financial companies. Moon highlighted that South Korea is on course to achieve annual economic growth of 3 percent this year, with robust exports and a record current account surplus. He also said the won may gain ground against the dollar down the road, as the current exchange rate does not fully reflect economic fundamentals.

The government also plans to establish a multi-layered risk management system by securing external financial safety nets, advancing foreign exchange policies, and ensuring coordinated implementation of policy measures, as reported by Yonhap.

Perspectives

Government and Ministry of Finance and Economy: The government views the 24-hour trading launch and internationalization roadmap as essential steps to boost foreign investor access, enhance market competitiveness, and reflect the country's strong economic fundamentals. Finance Minister Koo Yun-cheol called the launch a "reform measure" and a starting point for the won's global leap, while Second Vice Finance Minister Huh Chang emphasized the need for exporters to help stabilize the market and for fundamental reform of foreign exchange policies.

Central Bank (Bank of Korea): Deputy Governor Min Soo Kwon echoed the finance minister's positive view, saying the central bank will continue to closely monitor the impact of the new trading system on the market. He also stressed the need to continue implementing various policy efforts with the government to realize expectations that the launch will help expand the breadth and depth of the foreign exchange market.

Exporters (Samsung Electronics, SK hynix, Hyundai Motor Group): In a meeting with the vice finance minister, exporters agreed that a stable foreign exchange environment helps ease uncertainties and provides a stable foundation for investment and business management. They pledged to play a more responsible role in supporting the government's efforts, including converting export proceeds and foreign currency deposits into the Korean won.

Investors in London and Singapore: During roundtable discussions, investors heard about South Korea's economic growth prospects and the internationalization roadmap. Deputy Minister Moon Ji-sung called for their proactive investment in South Korea, and in foreign exchange sessions, he delivered briefings on the roadmap to registered foreign institutions. Their responses are not detailed in the available reports.