(July 6): As the South Korean won embarked on its first day of 24-hour trading, the country’s Finance Minister Koo Yun Cheol walked onto a bank trading floor to cheers and applause, as traders celebrated a key milestone in Seoul’s years-long drive to modernise its foreign-exchange market.
The newly-renovated dealing room at Hana Bank, complete with high-tech features including a domed screen, was packed on Monday with traders and officials eager to celebrate the currency’s round-the-clock debut. A huge monitor displayed two live feeds: one linking a Samsung Electronics Co official, the other showing traders in London. As Koo looked on, a trader on the floor executed a US$10 million ($12.93 million) dollar-won selling order for Samsung.
The extended trading hours could potentially bolster the case for the nation’s upgrade to MSCI Inc’s developed-market index, where accessibility has long been a stumbling block. The shift also reflects how the economy has evolved to one investing more overseas, making it harder to justify limiting trading to Korean business hours.
The won swung between losses and gains before trading at about 1,533 per dollar, after opening at 6am on Monday. Just last week, the currency had fallen towards its weakest since 2009, making the launch a delicate moment for regulators.
“This is the starting point for the won’s global leap,” Koo said. The move is designed to provide the level of accessibility and convenience in FX trading comparable to advanced markets, he added.
See also: Pound defies expectations as traders give Burnham a chance
The government will monitor the market seamlessly and support frictionless round-the-clock trading, while continuing to push forward with the other FX market reforms, Koo added.
Unprecedented
The shift is an unprecedented loosening of South Korea’s grip on its currency, a policy shaped by the trauma of the 1997 Asian financial crisis that nearly brought the economy to its knees. For years, Korea has sought to leave behind its emerging-market status and be considered an advanced economy to lure more global investors.
See also: Yen strengthens as options traders brace for US holiday intervention risk
Whether liquidity holds up overnight will be put to test later Monday as Seoul traders head out of the office and the currency heads into London and New York trading hours.
“Theoretically, extended trading hours should cause more volatility in the near term as liquidity tends to thin out during outside regular trading hours,” said Lim Hyeyoun, an economist at Hanwha Investment & Securities. But markets seem highly vigilant against possible intervention by authorities, Lim said.
Authorities have bolstered jawboning against excessive currency moves as the won continued to fall last week. Deputy Finance Minister Moon Jisung said Friday authorities would strengthen monitoring of the won’s night trading session ahead of Monday’s opening. The currency rebounded late last week after a Bloomberg report said officials were preparing for currency flows related to SK Hynix Inc’s US offering of American depositary receipts.
The won remains one of Asia’s weakest currencies this year as the Iran war led to higher energy prices and foreign investors sold domestic stocks to rebalance portfolios after stellar gains.
Uploaded by Chng Shear Lane
