The domestic foreign exchange market will be converted to a 24-hour trading system from July 6th for won and dollar only. Overseas residents and foreign exchange technology groups are expected to be able to trade at real-time exchange rates with less time limitations in the future. However, there are concerns that late-night hours with insufficient liquidity could lead to increased exchange rate volatility. The banking sector is also focusing on preparations, such as reorganizing its global desk.
According to the financial sector on the 28th, the five major commercial banks (KB Kookmin, Shinhan, Hana, Woori, and NH Nonghyup) are strengthening their overseas-oriented dealing system in line with the 24-hour opening of the foreign exchange market. Currently, won-dollar transactions take place from 9 a.m. to 2 a.m. the next day.
However, from the 6th of next month, trading will continue from 6 a.m. on Monday to 6 a.m. on Saturday. Excluding New Year’s Day, January 1 and weekends, the trading hours will be extended to 24 hours. Every day, the market price and the highest and lowest price exchange rate are from 6 a.mCalculated as of 6 a.m. the next day, instead, authorities statistics are based on the current weekly trading deadline of 3:30 p.m. On the 29th, limited pilot transactions for institutional investors will be conducted by simulating transactions by banks and securities companies that have applied in advance.
“Customers who are interested in foreign exchange technology or who are traveling or staying abroad can exchange money according to the flow of real-time exchange rates with less time constraints,” a bank official said. “The exchange rate close to the real-time price will also be applied in automatic exchange transactions through the system such as card payment, which will increase customer convenience.” There are also observations that foreign investors’ access to the won market will increase.
However, exchange rate volatility may increase due to insufficient liquidity in the night market at the beginning. Jungsik Kim, an honorary professor of economics at Yonsei University, said, “There is a possibility that price volatility will increase at night when the volume of transactions is limited,” and that the related system should be advanced at the same time.
Commercial banks are also securing response capabilities centered on London desks. This is because the early morning time zone in Seoul coincides with the daytime time zone in London. KB Kookmin, Shinhan, and Woori Bank will create a night response system centered on London desks and increase manpower.
[Reporter Kim Yechan / Reporter Lee Heesoo / Reporter Kim Myunghwan]
