SEOUL, Jan. 2 (Reuters) – South Korea announced on Tuesday that it would allow registered foreign financial institutions (RFIs) to engage in foreign exchange (FX) trading for current transactions, such as export and import settlements, starting in mid-January. The move is part of a broader effort to open up the won to more international investors and expand its presence in global markets.
The finance ministry stated that this change builds on previous measures to liberalize the won’s use in global finance, including granting foreign institutions access to onshore FX trading via the domestic interbank system starting last year.
Currently, RFIs are only permitted to trade the won in relation to securities transactions like stocks and bonds. However, with this new initiative, they will be able to facilitate a wider range of FX transactions, particularly those tied to trade-related activities. This marks an expansion of their operational scope, aligning with South Korea’s broader strategy to integrate its financial markets more deeply into the global system.
As part of its economic policy for the year ahead, the finance ministry has been working to enhance the flexibility of the won’s trading environment. Last year, it extended the trading hours for the onshore won and FX swap markets until 2 a.m., allowing these markets to remain open until the close of London’s business day.
“This change enables RFIs to engage in nearly all areas of foreign exchange trading to address real market needs,” said You Chang-yeon, a director at the finance ministry.
To ensure market stability, the ministry has also pledged to implement contingency measures as necessary, in close coordination with major global financial centers. The government is aiming to mitigate potential volatility as South Korea grapples with economic challenges, including a declining taxpaying population and the impact of a global trade dispute.
South Korea’s economy faces significant pressures, with the political landscape also in turmoil following a brief period of martial law imposed by President Yoon Suk-yeol in December, sparking widespread public dissent. Amid these challenges, the government is hopeful that increased foreign investments will help bolster its financial markets.
For 2025, South Korea’s government is projecting an economic growth rate of 1.8%, down from an anticipated 2.1% growth in 2024. Inflation is expected to hover at 1.8% in 2025, slightly under the central bank’s 2% target.
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