[Editorial] Night watch

Keeping the lights on longer does not make a market safer. It simply gives investors more hours to express confidence — or doubt.

South Korea’s decision to introduce weekday 24-hour foreign exchange trading, effective from Monday, is therefore both a milestone in financial modernization and a reminder that institutional reform cannot substitute for economic strength.

Opening the market around the clock is necessary. However, assuming it will stabilize the won is a costly illusion.

The reform addresses a long-standing weakness in Korea's foreign exchange system. For years, the domestic market closed while global investors continued trading the won through offshore non-deliverable forward markets in London, New York and Singapore. By the time Seoul reopened, overseas price movements had already dictated the day's starting point, leaving domestic authorities to react rather than respond.

According to the Bank for International Settlements, roughly 80 percent of won-forward trading last year took place through offshore NDF markets, compared with a global average of just 21 percent. Few major economies have tolerated such an imbalance for so long.

Continuous trading should help correct that distortion. Overnight developments will increasingly be absorbed into the domestic market instead of arriving wholesale at the opening bell.

Foreign investors will gain easier access to the won, while exporters and importers will be able to manage currency risk whenever necessary. This will help move Korea's financial infrastructure closer to international standards.

The changes also support Korea's ambition to attract global capital and satisfy the remaining conditions for inclusion in the MSCI Developed Markets Index.

The timing, however, is far from comfortable. The reform arrives while the won remains under exceptional pressure. The won-dollar exchange rate has hovered in the mid-1,500s for more than a month, its highest sustained level since the aftermath of the Asian financial crisis.

Foreign equity outflows, expanding overseas investment and expectations of higher US interest rates continue to favor the dollar. Longer trading hours do nothing by themselves to reverse those forces.

Indeed, the greatest vulnerability may emerge when the market is at its quietest. During late-night hours, trading volume will inevitably thin out. Under those conditions, relatively modest transactions or unexpected headlines could produce disproportionate price swings simply because liquidity is scarce.

Large corporations can monitor currency movements around the clock. Many small and medium-sized enterprises do not. A market designed to improve efficiency should not leave smaller participants bearing greater risk simply because they lack the resources to respond overnight.

That makes vigilant supervision indispensable, but surveillance alone cannot provide lasting protection. Authorities should maintain real-time monitoring capable of identifying abnormal price movements and speculative activity before instability spreads.

At the same time, Korea should beef up its broader financial defenses. Stronger reserves and more durable international liquidity arrangements, including currency swap agreements where possible, would reinforce confidence during market stress.

Ultimately, currencies are valued less for the hours during which they are traded than for the economies behind them. Investors hold a currency because they trust a country’s institutions, policy direction and long-term growth prospects. Extending trading hours modernizes the mechanics of the market, but it does not alter those fundamentals.

Sustainable exchange-rate stability will depend on policies that strengthen productivity, encourage investment, improve labor market flexibility and deepen confidence in Korea's economic future.

Keeping dealing rooms open through the night is an important step toward a more integrated financial market. But markets, like investors, never reward lost sleep for its own sake. They reward confidence.

Whether this reform delivers stability or volatility will depend less on the clock than on whether the economy gives investors reason to believe after dark.