The tension surrounding the South Korean won is palpable deep within a government building in Sejong City, about a two-hour drive from Seoul, in a room known as "the box."
Behind a door marked "Restricted Access," finance ministry officials monitor every minor fluctuation in the won, meticulously analyzing price movements and trading volumes to determine when intervention might be necessary. With the won hitting its lowest level in 17 years and becoming the worst-performing Asian currency in the first half of this year, the anxiety in this room has reached a peak.
Starting July 6th, the task for the staff here will become even more challenging as the won begins 24-hour trading for the first time. According to a person familiar with the matter, preparations are in full swing: catering has been upgraded, an additional staff member has been hired, and rickety camp beds may soon be replaced with more comfortable ones. The person requested anonymity as the information is not public.
For developed nations, 24-hour foreign exchange trading is commonplace and perhaps not a major event. For South Korea, however, this marks an unprecedented relaxation of control over its domestic currency. The country's foreign exchange policy remains deeply influenced by the trauma of the 1997 Asian financial crisis, which nearly brought the economy to its knees.
This change is crucial for Seoul's bid to have MSCI upgrade its status to a developed market, which would solidify its position as a global investment destination. It also reflects the transformation of the South Korean economy from a manufacturing powerhouse focused on export earnings to a nation increasingly investing overseas, making the previous limitation of won trading to domestic hours less justifiable.
"Extending trading hours is a necessary step to enhance its influence in global financial markets," said Claire Huang, senior Asia macro strategist at AXA Investment Managers. "To bring won trading to a level comparable with G10 currencies, ensuring liquidity during the extended hours is essential."
However, this significant move by South Korea comes at a delicate time.
Launching round-the-clock trading as the won approaches its weakest level since 2009 will make both the currency and the economy more vulnerable to speculators. Any misstep by regulators could exacerbate market volatility, fuel short bets, and undermine South Korea's investment prospects as it seeks a central role in the global AI boom.
The won's fall past 1,400 per dollar prompted President Lee Jae-myung to state it signaled a severe economic situation and immense pressure on households, with officials repeatedly warning against speculative trading. This year, regulators have inspected major banks for activities deemed destabilizing and urged exporters to convert their export earnings to help stabilize the won.
Despite these efforts, the won has continued to decline, recently trading around 1,540 per dollar, having fallen more than 6% this year.
The currency's weakness contrasts sharply with a booming economy and soaring stock market. The benchmark Kospi index has risen roughly 90% this year, the largest gain among major global indices, driven largely by the AI frenzy that has propelled Samsung Electronics Co., Ltd. and SK Hynix Inc. toward becoming trillion-dollar giants. Exports have hit record highs, and the current account surplus has grown substantially.
To understand this disconnect, a look back is helpful: for decades, the won was supported by strong exports and persistent current account surpluses. Exporters repatriated profits, and foreign investors flocked to South Korean assets.
Currently, that dynamic is fading. South Korea's current account surplus for the first four months of this year was $102.7 billion. However, much of this inflow has been offset by capital outflows—foreign direct investment and purchases of foreign securities by local investors, while global investors have pulled approximately $43.6 billion from the South Korean stock market.
In effect, South Korea is behaving increasingly like a capital exporter, continuing to earn dollars through trade but using those funds for overseas investment rather than recycling them back into the domestic market.
Other factors are also pressuring the won. The National Pension Service has been increasing its overseas investments, a move that involves buying dollars and selling won, though it has scaled back related plans this year. Investors are also concerned about the US-South Korea trade agreement, under which Seoul has pledged to invest $350 billion in the United States.
Nevertheless, Seoul is committed to the change in trading hours. "This is not merely a regulatory reform, but a crucial piece of infrastructure that will bring South Korea's capital markets to the level of accessibility and convenience expected of a developed market," said Deputy Finance Minister Moon Jisung in an interview.
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