The South Korean won falls after the declaration of martial law economy

South Korea’s won currency fell sharply against the dollar after President Yeon Seok-yul announced the implementation of martial law.

The exchange rate of the Korean won fell to 1443.40 following the announcement of martial law against the dollar from 1399.48 recorded during today’s trading, and it reached 1432.701 against the dollar, at the time of writing this report.

Yoon declared martial law in an unannounced speech broadcast late at night, accusing the opposition of seizing control of Parliament and paralyzing the government by carrying out “anti-state activities.”

Lowest since 2022

Thus, the won recorded its lowest level since October 26, 2022, when the local currency fell to the level of 1432.4 won against the dollar during the trading session.

In internal trading today, the local currency was priced at 1,402.9 won against the dollar at 3:30 pm (local time), down 1.6 won from the previous session.

Bloomberg quoted the head of global foreign exchange at Jefferies, Brad Bechtel, as saying: “The South Korean leadership has used martial law in the past during times of major political unrest or power transitions, but it is worrisome nonetheless.”

Bechtel expects the won to remain volatile for the time being. “A lot will depend on the reaction of foreign investors in local stock markets. If they start selling aggressively, we may reach (an exchange rate of) 1,450 (to the dollar),” he said.

South Korea’s economy in numbers

• South Korea’s economy is the fourth largest in Asia, with a value of $1.7 trillion, according to World Bank data.
• The per capita gross income in South Korea reached about 35.6 thousand dollars in 2023, according to data from the International Monetary Fund.
• Last Thursday, the Bank of Korea lowered its forecast for the country’s economic growth this year to 2.2% from its previous forecast of 2.4% last August. It also lowered its forecast for next year from its previous estimate of 2.1% to 1.9% amid slowing export growth and weak domestic demand.
• With a bleaker outlook for growth, the central bank unexpectedly cut its key interest rate by a quarter of a percentage point to 3%.
• In its latest report issued last week, the International Monetary Fund expected the Korean economy to grow by 2.2% this year and 2% in 2025.