South Korea urges calm in markets as it renews vow for action
SOUTH Korean policymakers urged calm in financial markets a day after a martial-law row that stunned the nation, renewing their pledge to take all possible steps to rein in volatility that could still increase ahead of US president-elect Donald Trump’s return to power next month.
The impact from the drama over President Yoon Suk-yeol’s about-turn on martial law has been limited on markets so far, the Finance Ministry said on Thursday (Dec 5), after Minister Choi Sang-mok met Bank of Korea (BOK) governor Rhee Chang-yong and the chiefs of financial watchdogs.
The meeting came after Cabinet members, including Choi, offered to resign en masse over the turmoil that erupted when Yoon put martial law into effect for the first time in more than 40 years.
The National Assembly controlled by the opposition quickly hit back with a motion that nullified the decree, and the opposition is now gearing up to impeach the president, who still has more than two years remaining in his term.
“As these domestic developments, coupled with the external uncertainties of the new US administration, are likely to lead to further volatility, the relevant organisations will continue to monitor market conditions closely and take all possible measures,” the ministry said.
The won has been among the biggest victims from the row that swept the nation and raised concerns about South Korea’s credit worthiness.
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After shooting above 1,440 won per US dollar in one of the most rapid depreciations in years, the exchange rate reversed back to around 1,410 won per dollar as at Thursday morning.
The government and the central bank have vowed to provide “unlimited liquidity” if necessary in the aftermath of the martial-law declaration.
On Wednesday, Rhee expressed confidence in the ability of authorities to keep the volatility under control, and dismissed the chance of cutting the interest rate solely on account of the political turbulence.
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The martial-law fracas adds more risks to an economic outlook that was already beginning to sour, as Trump prepares to return to the White House with an array of tariff plans that could hurt trade-reliant nations, such as South Korea.
The BOK slashed its forecast for 2025 economic growth as it cut borrowing costs for a second month in November, and government officials are preparing for Trump’s second term with contingency plans that include buying more American energy to narrow the trade surplus with the US.
“The full implications of this event remain to be seen,” Rohini Malkani and Thomas Torgerson at Morningstar DBRS, a credit ratings company, said.
“Nonetheless, the swift response by the legislature, central bank and government ministries attests to South Korea’s strong institutions, and we do not expect any major implications for the domestic economy.” BLOOMBERG
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