South Korean Won: Reform-driven support for won – Commerzbank

Commerzbank’s Dr. Henry Hao and Moses Lim highlight that the South Korean government has unveiled a major South Korean Won (KRW) internationalisation roadmap, including unlimited KRW transactions with foreign institutions from January 2027 and broader access to onshore markets. They argue these reforms should lower the risk premium, deepen offshore liquidity and improve foreign access, even as greater internationalisation may heighten KRW sensitivity to global risk sentiment. USD/KRW fell to 1,478 on exporter-driven Dollar sales.

KRW roadmap boosts offshore access

"The South Korean government unveiled a broad package of measures to internationalise the KRW following the launch of 24-hour FX trading in early July. The reforms represent one of the most significant steps to liberalise the currency in years, aimed at improving offshore liquidity and foreign investors’ access to South Korean markets."

"From January 2027, foreign investors will be allowed to conduct unlimited KRW transactions with pre-registered foreign institutions. The reforms will remove reporting requirements for most transactions and eliminate the need for foreigners to open KRW accounts in South Korea."

"Taken together, these reforms should improve offshore access to the KRW and deepen foreign participation in South Korean financial markets."

"The main benefit of the reforms is likely a lower risk premium and improved foreign access to South Korean assets. Deeper offshore liquidity could also facilitate larger investment and repatriation flows without generating excessive FX volatility."

"However, greater internationalisation may increase the KRW’s sensitivity to shifts in global risk sentiment over time."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)