South Korea urges calm in markets as it renews vow for action

SEOUL – 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 President-elect Donald Trump’s return to power in January.

The impact from the drama over President Yoon Suk Yeol’s about-face on martial law has been limited on markets so far, the Finance Ministry said in a statement on 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 the Cabinet, including Mr Choi,

offered to resign en masse

over the turmoil that erupted when Mr 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.

The ministry said: “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 won has been among the biggest victims from the row that swept the nation and raised concerns about South Korea’s credit worthiness.

After shooting above 1440 won per dollar in one of the most rapid depreciations in years, the exchange rate reversed back to around 1410 won per dollar as at the morning of Dec 5.

The government and the central bank have vowed to provide “unlimited liquidity” if necessary in the aftermath of the martial-law declaration.

In an interview on Dec 4, Mr Rhee expressed confidence in the ability of the authorities to keep the volatility under control and dismissed the chance of cutting the interest rate solely on account of the political turbulence.

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 economic growth in 2025 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,” Ms Rohini Malkani and Mr Thomas Torgerson at Morningstar DBRS – a credit ratings company – said in a note.

“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