Seoul to Start 24-Hour Won-Dollar Trading From July 6

Currency trading to run continuously except on weekends

Longer hours may help curb exchange-rate volatility

Seoul’s won-dollar market will shift to 24-hour trading from July 6, a move aimed at making transactions easier for domestic and overseas investors as well as importers and exporters. The longer hours may also help reduce exchange-rate volatility and support South Korea’s push for inclusion in MSCI’s developed-market index.

The Seoul Foreign Exchange Market Operating Council said on May 31 that it approved revisions to its code of conduct at a general meeting on May 29 to enable uninterrupted won-dollar trading beginning July 6. The market currently operates from 9 a.m. to 2 a.m. the following day. From July 6, trading will run from 6 a.m. Monday to 6 a.m. Saturday. That will allow round-the-clock won-dollar trading on all days except weekends and Jan. 1, including public holidays. Trading hours for currencies other than the US dollar will remain unchanged at 9 a.m. to 3:30 p.m.

Deputy Prime Minister Koo Yun-cheol, who also serves as minister of economy and finance, called the change at a recent foreign-exchange market reform meeting “a landmark measure that fundamentally changes the framework of the foreign-exchange system maintained since the 1997 foreign-exchange crisis.”

Longer trading hours have already helped smooth exchange-rate swings, according to the Korea Capital Market Institute. In a recent report, the institute said so-called gap volatility at the morning open fell 52.6% after the market’s closing time was extended in July 2024 to 2 a.m. from 3:30 p.m. That reflected the market’s ability to absorb the impact of overseas political and economic events immediately during nighttime trading.

The expanded hours may also draw foreign investors into the onshore market. Investors in New York and London currently rely mainly on the offshore non-deliverable forward, or NDF, market for won-dollar trading because Seoul’s market is closed during their daytime hours. Authorities expect that absorbing some of that NDF demand into Seoul’s foreign-exchange market will help stabilize the exchange rate.

Once the market shifts to a 24-hour system, the time-weighted average price, or TWAP, will be published at the top of every hour. For now, the methodology for calculating the market average rate, or MAR, will remain unchanged, based on exchange rates and trading volume recorded between 9 a.m. and 3:30 p.m. The council plans to hold another general meeting in June to revise the formula in line with global practice and apply it after a grace period. The transition period is expected to last about a year. A council official said Japan calculates its benchmark exchange rate based on 10 a.m., while the UK uses 4 p.m.

Nam Jeong-min, Hankyung.com reporter, peux@hankyung.com