South Korea plans to relax foreign-exchange rules governing capital transactions in the second half of the year as part of a broader effort to internationalize the won and deepen overseas use of the currency.

The government will seek to boost demand for the won by offering incentives for current-account transactions settled in the local currency and expanding foreign investors’ access to won-denominated investment products, according to its second-half economic policy direction released Tuesday.

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On the supply side, authorities will ease borrowing restrictions on foreign financial institutions so they can more easily secure won liquidity for securities settlement. They also plan to promote won-denominated trade finance through currency swap funds, measures aimed at encouraging greater use of the currency in trade and financial transactions.

The proposals underscore South Korea’s push to open its financial markets and expand the won’s role in global trade and investment. MSCI Inc has long cited the country’s foreign-exchange restrictions as a key reason it has not upgraded South Korea to developed-market status.

The reforms build on years of efforts to liberalize the foreign-exchange market, culminating in the launch of 24-hour won trading last week following decades of firm control over its currency. The extended schedule is designed to better overlap with global markets and improve access for overseas investors.

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The won has been among Asia’s weakest currencies for much of this year despite a semiconductor-led export boom and a record current-account surplus that underscore South Korea’s strong external position. The currency strengthened to about 1,488 per dollar on Tuesday amid a series of authorities’ jawboning in recent weeks and flows linked to exporters’ dollar sales.

The government also said it will strengthen its 24-hour monitoring and response system to address market volatility and maintain regular communication with foreign investors. In addition, officials pledged to draw up a plan in the second half to deepen the won’s deliverable foreign-exchange market, making the currency more accessible to offshore participants.