{"id":2203146,"date":"2023-12-15T15:00:46","date_gmt":"2023-12-15T06:00:46","guid":{"rendered":"https:\/\/koreapro.org\/?p=2203146"},"modified":"2023-12-18T16:00:37","modified_gmt":"2023-12-18T07:00:37","slug":"south-korea-warily-opens-its-forex-market-eyeing-growth-but-fearing-instability","status":"publish","type":"post","link":"https:\/\/koreapro.org\/2023\/12\/south-korea-warily-opens-its-forex-market-eyeing-growth-but-fearing-instability\/","title":{"rendered":"South Korea warily opens its forex market, eyeing growth but fearing instability"},"content":{"rendered":"
South Korea\u2019s <\/span>decision<\/span><\/a> to liberalize its foreign exchange market in October presents a mix of opportunities and challenges. This policy shift, aimed at enhancing the liquidity and global standing of the Korean won, comes with the promise of stimulating market activity, but it also introduces risks such as increased market volatility and the necessity for robust regulatory oversight.<\/span><\/p>\n Central to South Korea\u2019s market reforms is the opening of South Korea\u2019s foreign exchange market to international traders.<\/span><\/p>\n Historically, South Korea confined the trading of the Korean won largely to transactions against the U.S. dollar, exclusively through domestic banks. Moreover, the <\/span>limited<\/span><\/a> trading for just 6.5 hours a day between 9 a.m. and 3:30 p.m. KST reflected a cautious approach, especially in contrast to the 24-hour activity of global forex markets.<\/span><\/p>\n These constraints curtailed the international trading potential of the won and reflected South Korea\u2019s broader tendency toward a conservative financial strategy, a stance shaped in part by the aftermath of the <\/span>1997 Asian Financial Crisis<\/span><\/a>.<\/span><\/p>\n During that crisis, South Korea experienced a severe financial collapse that led to a sharp devaluation of the won, requiring a <\/span>bailout<\/span><\/a> from the International Monetary Fund. This crisis prompted South Korea to adopt more stringent financial regulations and a conservative approach to currency management.<\/span><\/p>\n However, this approach has meant that the scope for foreign trading activity on won markets remains relatively limited. According to the Bank of International Settlements, the <\/span>average<\/span><\/a> daily trading volume for all won-related forex products was $142 billion per day in 2022 \u2014 less than 2% of all daily foreign exchange <\/span>activity<\/span><\/a>.<\/span><\/p>\n By extending the trading hours and opening the market to international participants, South Korea is not only promoting increased liquidity and diversity in its financial sector but is also taking steps to enhance the international presence and influence of its currency.<\/span><\/p>\n These changes are anticipated to have wide-ranging implications for the nation\u2019s economy, affecting everything from international trade to South Korea\u2019s role in the global financial system.<\/span><\/p>\n