South Korea Permits RFIs to Particitpate in FX Trading

South Korea will allow registered foreign financial institutions (RFIs) to participate in foreign exchange (FX) trading for current transactions, such as export and import settlements, beginning mid-January, according to the finance ministry. This initiative is part of South Korea’s broader effort to internationalize the won and enhance its role in global markets. Since last year, foreign institutions have been permitted to trade the won onshore via the domestic interbank system, and the latest move further expands their trading capabilities.

Previously, RFIs could only engage in FX trading for securities transactions like stocks and bonds. The new policy significantly broadens their business scope, enabling them to facilitate FX deals directly for trade settlements. This change aligns with the government’s efforts to make the won more accessible and widely traded globally, including extending the trading hours for the onshore won and FX swap markets to 2 a.m. as of July, coinciding with the close of London business hours. "RFIs can now conduct virtually all areas of foreign exchange trading to meet actual demand," noted finance ministry director You Chang-yeon.

The finance ministry has also pledged to deploy contingency measures to stabilize financial markets if needed and to collaborate with international partners to mitigate volatility. These efforts come amid heightened political and economic challenges. The country has been navigating a political crisis, following a controversial martial law imposition in December that sparked widespread public backlash.

Economically, South Korea faces mounting pressures as its taxpaying population diminishes and robust export growth is threatened by global trade tensions. The government anticipates that new investment inflows in 2025 will bolster financial markets and offset some of these challenges. For 2025, it projects economic growth at 1.8%, following a 2.1% expansion in 2024. Inflation is expected to remain slightly below the central bank’s 2% target, at 1.8%.