FX Dealers Assess 24-Hour Forex Market Launch

The domestic won-dollar forex market has entered a 24-hour trading system for the first time in history, launching without significant disruption. Current FX dealers report that while trading volume during the early morning hours remains limited, the initial shock of opening has lessened, and exchange rate volatility is expected to decrease.

On July 7, a forex dealer at a major bank told Aju Economy in an interview, "The closing price of the offshore non-deliverable forward (NDF) last night and the opening price in the domestic market at 6 a.m. showed almost no difference," adding, "The effect of reduced volatility at the opening was noticeable."

He began his shift at 6 a.m. that day, taking over from the overnight team. Despite overseas events such as the release of the U.S. services purchasing managers' index (PMI), there was no significant shock to the market. He noted, "There was more trading in the regional spot market than expected, and the volume of trades covered by NDF has decreased significantly. Although trading was not very active due to the initial implementation of the system, the market moved calmly."

Since July 6, the domestic won-dollar forex market has transitioned to a 24-hour system, operating from 6 a.m. on Monday to 6 a.m. on Saturday, excluding weekends and January 1. This change moves away from the previous system that operated primarily from 9 a.m., aligning trading conditions with global forex market trends.

Lee Seok-jin, a forex dealer at Hana Bank who worked the 6 a.m. shift on the first trading day, stated, "Previously, it was routine to check the NDF market flow in preparation for the 9 a.m. opening, but now we are actually conducting spot forex trading from 6 a.m., which has changed our work approach entirely."

Trading between 6 a.m. and 9 a.m., which attracted significant interest from market participants, proceeded in a relatively calm atmosphere. The dealer remarked, "On the first day, participants were more inclined to observe the market rather than actively trade. Although the trading volume was not high, the bids were more tightly formed than expected, indicating that market functions were operating stably."

He added, "While it may not be easy to see a significant increase in trading volume immediately, as participation from foreign investors and import-export companies gradually expands, liquidity will naturally increase, especially with the establishment of the won payment system in the second half of the year."

The market is also anticipating changes in exchange rate movements. Previously, events occurring in overseas financial markets, such as New York, would be reflected all at once at the domestic market's opening at 9 a.m., often leading to increased volatility right after opening. However, with trading now continuing from 6 a.m., materials that arise overnight are expected to be reflected in prices sequentially, increasing the likelihood of continuous exchange rate movements.

The dealer explained, "In the past, significant events in the U.S. overnight would often cause the exchange rate to spike or plummet right at the 9 a.m. opening. Now, with trading occurring in the early morning, the exchange rate is likely to move more continuously, and the initial volatility at opening may gradually ease."

However, he anticipates that an adjustment period for the market is inevitable. He stated, "Market participants are still in the process of adapting to the new trading hours, and the true benefits of a 24-hour forex market will only be realized as trading builds up and foreign investor participation increases."

Forex authorities also assessed that the market operated stably on its first trading day. A Ministry of Economy and Finance official remarked, "In the initial phase, it is more important to ensure the system is securely established than to increase trading volume, and we expect market participation to gradually expand on a stable operational foundation."