Foreign Exchange Market Never Sleeps: 24-Hour Trading Begins Today

[Anchor]

Starting today (July 6), the won-dollar foreign exchange market will be open for 24-hour trading. While there are expectations that this will contribute to exchange rate stability by making it easier for foreign investors to convert currency for Korean stocks, some concerns remain.

Reporter Lee Tae-gwon explains.

[Reporter]

Domestic and international financial institutions, foreign investors, and import-export companies will be able to trade won-dollar pairs 24 hours a day, excluding weekends and January 1.

For individual currency exchange, services will be rolled out sequentially starting with financial institutions that have established the necessary systems.

What will change now that the foreign exchange market is open 24 hours?

Previously, 24-hour currency exchange was already possible through bank or brokerage apps.

However, during hours when the market was closed, exchanges were made at a provisional exchange rate about 5 percent higher, with the actual rate settled once the market opened.

For example, if a domestic investor wanted to buy 20 shares of a U.S. stock worth 100 dollars each at 3:00 AM, and the market exchange rate was 1,500 won, they previously had to hold 3.15 million won because they had to exchange at a 5 percent higher rate of 1,575 won.

But now, with real-time exchange rates applied, they can invest with just 3 million won.

What about export companies that receive dollar payments in the early morning hours, Korea Standard Time?

If they expect the exchange rate to fall, they can immediately convert their currency to manage the risk of loss.

Furthermore, if major news from the United States during the night is reflected in real-time, shocks to the exchange rate could be reduced.

[Interview: Kang Hyun-ju, Senior Research Fellow at Korea Capital Market Institute] "Because we are now covering the entire New York market, situations that could not be fully reflected in the domestic foreign exchange market can now be absorbed during trading hours..."

As the convenience of currency exchange for overseas investors and financial institutions increases, it is also expected to help with inclusion in the MSCI Developed Markets Index, which serves as a benchmark for global investors.

However, there are concerns that because trading volume may be low during late-night hours, price volatility could occur due to specific orders.

Experts point out that measures to secure liquidity, such as incentives to promote night trading, must be implemented in parallel.

Reported by Lee Tae-gwon | Video by Park Na-young | Graphics by Im Chan-hyeok
※ Please note: This article was translated by AI and may contain errors.