South Korea unveils details of steps to broaden FX market

FILE PHOTO: A South Korea won note is seen in this illustration photo May 31, 2017. REUTERS/Thomas White/Illustration/File Photo

SEOUL (Reuters) – South Korea unveiled on Tuesday details of a long-touted plan to expand its currency spot and swap markets to offshore players as it strives to make its stock and bond markets more attractive to global investors.

The inter-dealer market for the won will be open for an additional 10 hours, and offshore financial firms will be allowed to participate in the trading of the won and currency swaps, according to a joint statement by three agencies.

If implemented as planned, it would mark the most dramatic change in the inter-dealer won market since the Asian financial crisis of late 1990s, when the country turned to a free-floating foreign exchange system from a tightly managed one.

“The closed and restrictive structure of the foreign exchange market has hindered the stability of the exchange rate and played an obstacle in the financial industry’s development,” the Ministry of Economy and Finance, the Bank of Korea and the Financial Supervisory Service said in the joint statement.

They said they would put these changes into force from late 2024 after completing legal and administrative adjustments.

The closing hour of the onshore won market, which opens at 9:00 a.m. (0000 GMT), will be extended significantly to 2:00 a.m. the following day (1700 GMT) from 3:30 p.m. at present, to cover the trading hours of U.S. and European markets, they said.

The moves come as the country has been striving to have its stocks added to Morgan Stanley Capital International’s developed market index, and for its won-currency government bonds to be added to FTSE Russell’s World Government Bond Index.

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