24-Hour Foreign Exchange Market
Overview
The Foreign Exchange Market (외환시장) is a global over-the-counter (OTC) market where major financial centers around the world are connected by time zone, enabling trading 24 hours a day except weekends. This market operates seamlessly as key trading sessions in New York, London, Tokyo, Sydney, and others open sequentially, and it is the world's largest financial market with an average daily trading volume exceeding $7.5 trillion (as of 2024).
Main Content
1. Principle of 24-Hour Operation in the Foreign Exchange Market
The foreign exchange market is not a centralized exchange but consists of OTC transactions between global banks, financial institutions, corporations, central banks, and individual investors. Trading begins in Sydney, then moves to Tokyo, London, and New York, with trading volume and volatility surging during overlapping sessions. For example, the overlap of the London and New York sessions (9 PM to 1 AM the next day, Korean time) is the most active trading period. Most trading halts on weekends (Saturday to Sunday), but limited trading is possible for some cryptocurrencies or under special circumstances.
2. Major Trading Sessions
- Sydney Session (6 AM – 3 PM, Korean time): Centered on the Australian dollar (AUD) and New Zealand dollar (NZD). Relatively low trading volume and volatility.
- Tokyo Session (8 AM – 5 PM): Active trading in the Japanese yen (JPY). Leads the flow of Asian markets, with volatility increasing upon the release of Japanese economic indicators.
- London Session (4 PM – 1 AM next day): A core session accounting for approximately 35% of global forex trading. Trading is concentrated in the euro (EUR), British pound (GBP), and Swiss franc (CHF), with the highest volatility.
- New York Session (9 PM – 6 AM next day): The center of US dollar (USD) trading. US economic data releases (employment, GDP, CPI, etc.) and Federal Reserve (Fed) statements significantly impact the market.
3. Market Participants
- Commercial and Investment Banks: Provide liquidity by processing client orders and proprietary trading. Major players include Deutsche Bank, JPMorgan, and Citibank.
- Central Banks: Intervene in the market to stabilize exchange rates and implement monetary policy. Examples: Bank of Japan's yen-buying intervention, Swiss National Bank's defense of the franc.
- Corporations and Hedge Funds: Multinational corporations participate for trade settlement and currency hedging; hedge funds engage for arbitrage and speculation.
- Individual Investors: Trade small amounts through online FX brokers. Scalping and day trading using leverage (up to 1:50) are common.
4. Advantages and Disadvantages of 24-Hour Trading
- Advantages: Abundant liquidity, low transaction costs (spreads), immediate response to global events, no time constraints.
- Disadvantages: Need for 24-hour monitoring, gap risk (weekends/holidays), risk of losses from excessive leverage, potential for market manipulation.
5. Major Currency Pairs and Trading Volume
- Major Pairs: EUR/USD (approx. 24%), USD/JPY (13%), GBP/USD (9%), USD/CHF (5%).
- Cross Pairs: Pairs not involving the dollar, such as EUR/JPY, GBP/JPY.
- Emerging Market Currencies: USD/KRW, USD/TRY, USD/BRL, etc. High volatility and wide spreads.
Latest Trends
From 2024 to 2025, the 24-hour foreign exchange market has seen several important changes. First, the spread of algorithmic trading and AI has led high-frequency trading (HFT) to account for over 70% of total trading volume, concentrating market volatility in shorter time frames. Second, the accelerated introduction of central bank digital currencies (CBDCs)—such as China's digital yuan and the European Central Bank's digital euro—has been included in some pilot trades, raising the possibility of linkage with the traditional forex market. Third, increased volatility due to geopolitical risks: The Russia-Ukraine war, Middle East conflicts, and US-China trade tensions have caused sharp fluctuations in specific currencies (ruble, shekel, yuan), immediately reflected in the 24-hour market. Fourth, a trend toward stricter regulation: Following Europe's MiFID II and the US Dodd-Frank Act, leverage limits and reporting obligations have been tightened. In 2025, a revised version of the Global FX Code is expected to be released, updating best practices to enhance market transparency. Fifth, an increase in individual investor inflows: Access to 24-hour trading has expanded through social trading platforms (eToro, ZuluTrade) and mobile apps (KakaoPay, Toss) for overseas stock and forex investments.
Related Topics
- [[Exchange Rate Determination Theories]]
- [[Foreign Exchange Reserves]]
- [[FX Margin Trading]]
- [[Central Bank Monetary Policy]]
- [[Global Financial Market]]
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