South Korea’s daily average spot foreign exchange trading rose more than 10% after the country opened its currency market around the clock in July, according to government data.
The Ministry of Economy and Finance said it held a meeting of its foreign exchange soundness council and its task force for joining the MSCI Developed Markets Index on the 14th at the Seoul Financial Center, chaired by Second Vice Minister Heo Jang. The meeting reviewed progress on the “roadmap for joining the MSCI Developed Markets Index” announced in January and future plans. Of 39 tasks across eight areas, 30 have been completed so far, and the government plans to carry out three more this year.
The foreign exchange market, which began 24-hour operation on July 6, has run smoothly without disruptions such as failed trades, the ministry said. A government official said the won-dollar exchange rate has also remained stable compared with other major currencies.
Daily average spot trading in the interbank market stood at about $17.39 billion in the first half of the year but rose to $19.14 billion, up roughly 10.1%, after the market moved to 24-hour trading. Late-night trading, however, has grown only gradually because the system is still in its early stages and because of time-zone differences abroad. The government plans to give weight to late-night trading volume when selecting lead banks for the won-dollar market, in order to encourage domestic banks to take part in overnight trading.
The meeting also discussed how rising domestic stock prices affect Korea’s external soundness indicators. Heo said the KOSPI rose 68% in the second quarter from the end of the first quarter, and that net external financial assets are expected to fall sharply as a result, but that this has nothing to do with any deterioration in the economy’s external soundness. Participants likewise assessed that the decline in net external financial assets stems not from a current account deficit or expanded external borrowing, but from a rise in the value of Korean stocks held by foreigners, driven by improving economic fundamentals such as better corporate earnings.