Liquidity has tended to fall during late night hours, and given the shock, some impact was probably inevitable, said Kim Hee Jae, director of the finance ministry’s currency market division.
“Apart from that, we’ve been mulling measures to boost liquidity at night, and plan on announcing them within this year,” Kim said in a phone call, without providing further details.
Keeping liquidity alive during late-night hours for the Korean won has been a top agenda item for authorities since trading hours for the currency were extended in July. That’s to make the won easier to trade and facilitate the inclusion of Korean stocks and bonds in global indexes.
Hours were extended to 2.00 am from 3.30 pm from Jul 1, and local banks have implemented night shifts as part of the new regime. At the time, authorities pledged to intervene to curb any volatility and the Bank of Korea was quick to calm markets this week with promises of unlimited liquidity if required.
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After news of the crisis broke, foreigners continued to actively trade in the forward market, according to five traders, who asked not to be named as they are not authorised to speak publicly. The spot market followed moves in NDFs, they said.
One said they were told by their manager to refrain from trading and adjust positions accordingly as the uncertainty grew. Still, some local brokerages that normally don’t trade at night were spotted in the market too, the traders said.
On Tuesday night in Seoul, the won dropped close to 3%, sending some local traders rushing back to their offices.
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“I came across the news at around 10.40 pm and arrived back in the office after that,” said Kim Yule, a currency trader at Shinhan Bank, who was joined by two colleagues to help with the night shift.
“Normally, one person is enough to manage overnight trading,” but on Tuesday, “trading volume was at least two to three times bigger than usual, and so was the number of calls from clients,” Kim said.
