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2026-07-19 11:22:12
[South Korea Plans to Expand Foreign Investment in Korean Bonds and Collateral to Boost the Won and Promote Internationalization] 1. South Korea's Ministry of Finance announced on Sunday (July 19) plans to allow foreign financial institutions to borrow won through temporary overdrafts and to use won-denominated bonds as collateral in financial transactions. These measures are part of an incentive program designed to encourage the use of the won and transform it from a restricted domestic currency into a more global one. 2. Prior to these measures, South Korea extended trading hours for the USD/KRW exchange rate to 24 hours a day starting July 6, marking a shift towards opening up its long-closed currency. These two moves are seen by some market participants as key steps in South Korea's bid to have its stock market upgraded from an emerging market to a developed market index by MSCI. 3. The won exchange rate has been under pressure recently due to the escalating US-Iran conflict, high oil prices, and capital outflows. In early July, the USD/KRW exchange rate approached the 1,560 won mark. Analysts point out that foreign holdings of South Korean bonds have reached approximately 200 trillion won. If the policy is implemented, it will significantly improve the international usability of the won and attract more overseas capital into the South Korean bond market, thus supporting the won. However, the market is also concerned that, given the Federal Reserve's maintenance of high interest rates, whether the won can reverse its downward trend solely through structural reforms remains to be seen.
