Following a dramatic night of martial law by President Yoon, the Bank of Korea (BOK) convened an emergency meeting to discuss measures for stabilizing the foreign exchange market.
Last week, the BOK had already cut its benchmark interest rate by 25 basis points. However, this effort was overshadowed when South Korean President Yoon Suk Yeol declared emergency martial law late Tuesday night, causing a shockwave through the FX and stock markets.
The South Korean currency won fell sharply against every single one of its peers after the announcement of martial law, while the iShares MSCI South Korea ETF (EWY) plunged as much as 7%, hitting a 52-week low, before rebounding slightly to close 1.6% lower.
The National Assembly swiftly overturned the order, forcing Yoon to lift martial law early Wednesday morning and withdraw deployed military units.
While Citi analysts suggest the economic and financial impact may be short-lived due to proactive policy responses, South Korea’s Finance Minister Choi Sang-mok vowed to inject unlimited liquidity into financial markets to ensure stability. Additionally, the national financial regulator prepared to allocate 10 trillion won ($7.07 billion) to a stock market stabilization fund at any moment.
In the latest move by the parliament, South Korea’s opposition Democratic Party is planning to impeach President Yoon Suk Yeol, alleging that his decisions were unconstitutional. Regardless of the outcome, the move could significantly impact the country’s economy.
