South Korean President Yoon Suk Yeol sent shockwaves across markets after he declared an emergency martial law at around 11 pm local time on Tue night (3 Dec), only to lift it six hours later following a parliamentary vote where 190 of 300 lawmakers demanded the lifting of the martial law. Under South Korean law, the government must lift martial law if a majority in parliament demands it in a vote, UOB Group’s FX analysts Ho Woei Chen and Peter Chia note.

Political miscalculation likely to bring early end to President Yoon’s term

“South Korean President Yoon Suk Yeol sent shockwaves across markets after he declared an emergency martial law at around 11 pm local time on Tue night (3 Dec), only to lift it six hours later. South Korea financial authorities’ pledge to ‘inject unlimited liquidity’ is expected to stabilize markets.”

“Next to watch will be the political consequences on President Yoon. Impeachment proceedings could follow soon after, bringing an early end to his term originally set to end in May 2027. A general election will likely be held in early 2025 following the impeachment.”

“Given the political uncertainties, the BOK could deliver the next 25 bps cut as soon as its Jan meeting (16 Jan). While the currency has since pared most of the losses, USD/KRW is likely to stay above 1,400 in the near term, reflecting the political uncertainties. At the same time, BOK’s pledge may help reduce KRW’s downside. Overall, we reiterate the view that USD/KRW will trade higher across most part of 2025.”