Won-Dollar FX Goes 24 Hours as Wednesday's FOMC Minutes Loom
Starting Monday, Korea's won-dollar FX market moved to round-the-clock trading, running from Monday morning through Saturday dawn without a break. Previously, once the domestic session closed, speculative trading migrated to the offshore non-deliverable forward (NDF) market, where positions are settled purely on price difference without physical delivery — and that offshore activity would then feed directly into the following day's onshore rate. The move effectively extends the onshore session to 24 hours to dilute the outsized influence of that offshore speculative flow.
Coincidentally, the roughly 45 trillion won raised through SK Hynix's ADR listing this week will need to be converted into won for domestic chip investment, and that conversion demand was cited as a further source of support for the currency. Foreign media noted the extended hours could revive won carry trades, while cautioning that some volatility should be expected early on until participants' trading patterns become clear in this newly opened market. Since FX market accessibility was a key criterion in the debate over MSCI developed-market inclusion, the 24-hour opening could also work in Korea's favor in future reviews.
This Wednesday brings the first FOMC minutes released under the newly installed Fed chair. Given that the chair avoided giving explicit hints at the prior press conference, the tone and nuance of the closed-door discussion among committee members are expected to draw close market attention. Elsewhere this week, Korea's options expiration falls on Thursday, and Friday brings both the SK Hynix ADR listing and TSMC's June revenue release.
LS Securities' Shin Jung-ho attributed the won's recent weakness to the combination of roughly 180 trillion won a year in foreign net selling of KOSPI shares and a stronger dollar. He said dollar strength stems from lingering worry that the Fed could resume rate hikes if next week's inflation data comes in hotter than expected, even as recent employment data has softened somewhat. He also pointed to global liquidity — aggregate M2 — peaking in February and declining since, alongside simultaneously hawkish stances from the Bank of Korea, the Bank of Japan and the European Central Bank, as further pressure behind the won's weakness.