The South Korean government has announced a comprehensive roadmap to internationalise the South Korean Won (KRW), marking one of the most significant liberalisation steps for the currency in years [1]. The reforms include allowing unlimited KRW transactions with pre-registered foreign institutions starting January 2027, as well as removing reporting requirements for most transactions and eliminating the need for foreigners to open KRW accounts in South Korea [1]. These measures are designed to improve offshore liquidity and facilitate greater foreign investor access to South Korean financial markets [1].
Commerzbank analysts Dr. Henry Hao and Moses Lim note that the reforms are expected to lower the risk premium associated with the KRW, deepen offshore liquidity, and enhance foreign participation in South Korean assets [1]. The launch of 24-hour FX trading in early July is also highlighted as a key step in this liberalisation process [1]. As a result of exporter-driven Dollar sales, the USD/KRW exchange rate fell to 1,478 [1].
While the reforms are anticipated to bring substantial benefits, such as facilitating larger investment and repatriation flows without causing excessive FX volatility, Commerzbank cautions that increased internationalisation may also heighten the KRW’s sensitivity to global risk sentiment over time [1].
CONCLUSION
South Korea's sweeping KRW internationalisation reforms are set to significantly enhance foreign access and liquidity in its financial markets, with the potential to lower the currency's risk premium. However, analysts caution that greater global integration could make the KRW more sensitive to shifts in international risk sentiment.