South Korea to expand forex market to 24-hour operations from Monday, offshore won settlement system set for January

The South Korean government plans to release a "won internationalization roadmap" this month, outlining a phased transition that would allow the won to be used freely in offshore markets.

The foreign exchange market will expand to full 24-hour operations starting Monday, and an offshore won settlement system will be introduced in January, as the government accelerates efforts to modernize the foreign exchange and capital markets. However, given the recent rise in exchange rate volatility, the government reaffirmed its readiness to take immediate market stabilization measures should one-sided market movements intensify.

According to South Korea's Ministry of Finance and Economy on Thursday, Second Vice Minister Heo Jang chaired the second plenary session of the International Financial Policy Advisory Committee on Wednesday, where participants discussed the direction of won internationalization and foreign exchange market modernization. The advisory committee was launched in December last year to gather input from academics, research institutions and market experts on international finance and foreign exchange policy.

At the meeting, Heo said investor roadshows held in major financial hubs including Hong Kong and Singapore in the first half of the year confirmed that overseas investors' attention to the Korean economy and capital markets has grown significantly. He also noted that South Korea's investment appeal has risen on the back of its scheduled inclusion in the World Government Bond Index (WGBI) in April next year and the government's ongoing market modernization efforts.

To translate that interest into actual investment, the government plans to release the won internationalization roadmap this month.

The core of the plan is to overhaul the transaction and settlement infrastructure and institutional framework so that foreigners can more freely access and use the won in offshore markets. The government also envisions expanding the use of the won in current account transactions to broaden its international reach.

The push to modernize the foreign exchange market will also move into full gear. The market will shift to 24-hour operations starting Monday, and an offshore won settlement system will be introduced in January. The government said it will reinforce external safeguards in line with the expanded market opening to enhance overall market stability.

Advisory committee members assessed that policy conditions for advancing won internationalization and foreign exchange market modernization are now sufficiently mature.

They said improvements to won transaction and settlement infrastructure, along with greater market accessibility, would lay the groundwork for enhancing the convenience of overseas investors and broadening the base of the domestic capital market. They also recommended strengthening policy predictability and communication with foreign investors, while upgrading the external risk management framework to keep pace with the expanded market opening.

The government assessed that foreign exchange market volatility has been rising, driven by the possibility of further interest rate increases by the US Federal Reserve and net selling of domestic shares by foreign investors.

"The foreign exchange authorities have sufficient capacity to respond, and are fully prepared to take necessary market stabilization measures immediately should the exchange rate deviate from economic fundamentals and one-sided movements intensify," Heo said.