Monetary Reform: Pathways to Won Freedom

South Korea is adopting a gradual and structural approach to making the won more flexible in international markets. The objective is to facilitate access for foreign investors and corporations to assets and hedging tools while also reducing currency volatility in the domestic economy. Reforms include the adoption of time-weighted average price (TWAP) based exchange rate indices, as well as new electronic trading guidelines for overnight transactions. These measures are designed to minimize immediate market impacts but promote sustainable growth in international won transactions over time. To encourage the use of the won in international trade transactions, the government plans to offer extended trade guarantees and other fiscal incentives. This initiative aligns with global financial integration trends, allowing countries like South Korea to become more competitive in the global economic landscape. It represents an important step towards the professionalization of South Korean economy and its full integration into global financial dynamics.