USD/KRW Volatility in the 1500s: What is the Impact of the 24-Hour Forex Market Opening?
The domestic forex market is transitioning to a 24-hour operation. Amid focus on whether the USD/KRW rate will hit the 1500s, we analyze the prospects and concerns over increased volatility due to lack of nighttime liquidity.
What Changes with the 24-Hour Forex Market Opening?
Starting on the 7th, the trading hours of the domestic foreign exchange market will be expanded to 24 hours. The addition of nighttime Korean Won trading to the existing daytime sessions is expected to significantly improve accessibility and convenience for foreign investors. However, there are also concerns that in the initial stages of implementation, a lack of nighttime liquidity could cause the exchange rate to fluctuate wildly even with low trading volumes.
Volatility in the 1500s: Key Checkpoints
Following the recent US June employment report, where new job numbers fell short of market expectations (57,000), expectations for an early interest rate cut by the Federal Reserve have grown, leading to a weaker dollar. Consequently, the USD/KRW exchange rate closed lower in the short term. However, global macroeconomic uncertainties persist, and the possibility of re-breaking the 1,500 won mark cannot be ruled out. With the 24-hour opening, the risk of extreme exchange rate fluctuations could intensify if negative overseas news breaks during the night.
Frequently Asked Questions (FAQ)
How does extended nighttime trading affect individual investors?
For retail investors trading foreign stocks, real-time exchange rates will be applied even during late-night hours, allowing for more accurate currency exchange and investment costs, thereby increasing convenience.
Why is exchange rate volatility expected to increase at night?
Because there are fewer market participants and lower trading volumes at night compared to the daytime (lack of liquidity), even small buy or sell orders can cause significant price movements, a phenomenon known as 'slippage'.