Author: Cynthia Kim
SEOUL (Reuters) – South Korea’s finance ministry said on Wednesday it was ready to deploy “unlimited” liquidity to financial markets if needed after President Yoon Suk Yeol lifted an overnight state of emergency that pushed the won to a multi-year low the lowest level.
The announcement came after Finance Minister Choi Sang-mok and Bank of Korea Governor Rhee Chang-yong held emergency meetings overnight, ahead of an emergency BOK meeting suddenly scheduled for 9 a.m. local time (0000 GMT) on Wednesday.
“All financial, foreign exchange and stock markets will function normally,” the government said in a statement.
“We will inject unlimited liquidity into stocks, bonds, the short-term money market as well as the forex market for now until they fully normalize.”
South Korea’s won pared some losses early on Wednesday but held near a two-year low after Yoon lifted his shock declaration of a state of emergency, deference to a parliamentary vote against the measure.
South Korea’s parliament, with 190 of its 300 members present, unanimously passed a motion on Wednesday demanding the lifting of the state of emergency.
U.S.-listed South Korean stocks fell, while New York-traded products including the iShares MSCI South Korea ETF and the Franklin South Korea ETF each lost about 1%.
The Korean won also fell sharply against the yen to its weakest since May 2023, down 2.5%.
The political turmoil comes as Yoon and the opposition-controlled parliament clash over the budget and other measures.
The opposition Democratic Party last week cut 4.1 trillion won from the total 677.4 trillion won ($470.7 billion) budget proposal submitted by the Yoon government, leaving parliament deadlocked over control of the 2025 annual budget.
On Monday, the President of the Parliament prevented the budget revision from going to the final vote.
A successful budget intervention by the opposition would deal a major blow to Yoon’s minority government and risk cutting fiscal spending at a time when export growth is slowing.
“The negative impact on the economy and financial market could be short-lived as uncertainties in the political and economic environment could be quickly mitigated with a proactive policy response,” Citi economist Kim Jin-wook said in a report.
