Extended 24‑Hour Won‑Dollar Trading Hours Raise Volatility Risks

An employee arranges U.S. dollar bills alongside 50,000 won notes at a Hana Bank branch in central Seoul, April 3. Yonhap

Korea’s decision to implement a near‑continuous won‑dollar foreign‑exchange market beginning in July has sparked concerns that the won could become more exposed to overnight volatility when trading volumes are low, industry analysts said on Sunday.

To broaden access for global investors across time zones, the Seoul Foreign Exchange Market Committee approved on Friday an extension of trading hours from the existing 9 a.m.‑2 a.m. Seoul schedule to near‑continuous trading starting July 6.

The market will run continuously throughout the workweek, closing only on weekends and New Year’s Day. Aligned with New York time, it will operate from 6 a.m. Monday to 6 a.m. Saturday during U.S. daylight‑saving periods and from 7 a.m. Monday to 7 a.m. Saturday for the remainder of the year.

The market will also commence publishing hourly time‑weighted average prices (TWAPs) for the won‑dollar exchange rate, derived from broker quotes gathered near the top of each hour.

Settlement procedures remain unchanged, with transactions continuing to be settled only on banking business days.

The extended trading hours are part of the government’s strategy to broaden access to Korea’s financial markets for overseas participants. Officials anticipate that greater liquidity and reduced trading frictions will enable global investors, exporters, importers, and Korean residents investing abroad to access the won‑dollar market more conveniently across time zones.

The reform aligns with Seoul’s ongoing effort to attain developed‑market status from MSCI, whose benchmarks influence trillions of dollars in global investment flows. For years, investors and index providers have cited restrictions in Korea’s foreign‑exchange market — particularly the won’s limited trading hours — as obstacles to wider international participation.

Nevertheless, not all observers view the change as entirely beneficial. Some economists warn that extending trading into overnight hours may increase the won’s exposure to sharper price swings as liquidity naturally diminishes outside Asia’s regular trading session.

The risk could be amplified by the structure of Korea’s foreign‑exchange market, which has historically been relatively small relative to the size of the economy, according to Yang Jun‑sok, an economics professor at the Catholic University of Korea.

“Because the market is relatively small, shifts in cross‑border investment and capital flows tend to exert a disproportionate influence on the won compared with larger currency markets,” he said.

This concern is especially relevant because many of the global events that drive currency markets — such as U.S. consumer price index releases, employment data, and Federal Reserve policy decisions — are announced while Korea is asleep.

With fewer importers, exporters, and domestic institutions active during those hours, offshore investors and speculative traders may exert greater influence on the won‑dollar rate, potentially amplifying short‑term volatility.

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