As South Korea aims to elevate the global standing of its financial markets, challenges persist in easing stringent currency regulations, which have long troubled investors and traders.

Despite being recognized as one of the world's most advanced economies by various metrics, South Korea remains categorized as an emerging market due in part to its currency management practices.

While authorities are contemplating minor adjustments to enhance the internationalization of the won, such as extending trading hours, memories of past currency crises continue to influence reform efforts.

For many businesses and market participants, South Korea's complex regulations on cross-border transactions, daily reporting requirements, and brokerage rules result in slow and costly operations.

Extending foreign exchange market hours could facilitate better currency planning and negotiation, according to Bongju Kang, a chief financial manager at a small plastic materials exporter. Currently, deals are often negotiated with local bankers upon spotting favorable exchange rates, sometimes hours in advance, particularly for larger transactions.

These FX restrictions contribute to what is known as the "Korea Discount," which refers to the underperformance of local stocks on a global scale. Other contributing factors include governance issues within major conglomerates.

Regulators emphasize the need for thorough market surveillance to mitigate destabilizing currency fluctuations, particularly during periods of volatility when onshore market liquidity may be limited.

Despite upcoming changes such as extending trading hours to cover London hours and the anticipated participation of more foreign banks, analysts and market participants remain skeptical about meaningful improvements in won trade accessibility.

South Korea's daily won trade volume, totaling $66 billion, comprises around 1% of global forex volume, lagging behind currencies like the Canadian dollar and British pound. This relatively low volume keeps South Korea classified as an emerging market.

Kim Hee-jin, head of trading at Shinhan Bank, believes relaxing forex rules could propel the won to surpass currencies like the British pound, aligning it with South Korea's status as a major global exporter.

However, existing regulations, including the requirement for foreign banks to trade won through local brokerages and limitations on offshore trading between foreign banks, underscore South Korea's cautious approach to market surveillance, shaped by past financial crises.

In conclusion, while South Korea endeavors to enhance the global appeal of its financial markets, navigating regulatory constraints remains a significant challenge in achieving broader currency internationalization and attracting increased foreign investment.

Paraphrasing text from "Investing" all rights reserved by the original author.