The Bank of Korea (BoK), South Korea’s central bank, announced plans on Wednesday to implement a range of measures aimed at stabilizing the foreign exchange (FX) market. This decision comes in light of recent volatility surrounding the South Korean Won.
To address the situation, the BoK will enhance its short-term liquidity provisions starting immediately. Additional steps include relaxing collateral requirements for repurchase (repo) operations to alleviate concerns in the bond market. These measures are intended to facilitate a smoother functioning of financial markets and to ensure adequate funding is available if required.
The bank’s readiness to intervene comes after a significant surge in the USD/KRW exchange rate, which reached a peak of 1,444.05 on Tuesday. This spike was largely attributed to political instability following President Yoon Suk Yeol’s declaration of “emergency martial law,” which he made while accusing the opposition Democratic Party of aligning with North Korea. However, the situation shifted quickly as South Korea’s parliament moved to overrule the martial law, prompting a subsequent correction in the currency value that brought the USD/KRW down near 1,415.
The recent political turmoil has incited further actions from the opposition party, which is pursuing impeachment proceedings against President Yoon unless he resigns promptly. This ongoing political drama continues to exert pressure on the nation’s economic stability.
In conclusion, the Bank of Korea’s proactive stance aims to provide support to the Won and mitigate market fluctuations amid a backdrop of heightened political uncertainty. The central bank remains vigilant and will adjust its strategies as necessary to uphold confidence in the financial system.
