Political Storm in South Korea: Won in Investors' Focus

The political landscape of South Korea is currently causing considerable movement in the financial markets as investors react to the recent vote contemplating the impeachment of President Yoon Suk Yeol. He had shocked the markets with his attempt to declare martial law. The South Korean currency, the won, is particularly in the spotlight. Amidst the political turbulence, the won has lost more than 2% against the US dollar. Since the surprising martial law attempt on December 3 and its subsequent withdrawal, the won was quoted at 1,435.45 per dollar on Friday. So Jaeyong, an economist at Shinhan Bank, stated before the vote that with the adoption of the impeachment process, political uncertainty might come to an end, which could limit the won's loss to around 1,444 per dollar. Thus, the worst pressure on the currency initially seems to have been alleviated. Simultaneously, the South Korean stock market has already shown a significant recovery. The Kospi index rose by 2.7% last week as investors anticipated Yoon's likely departure. Developments at the beginning of the week will show how confident market participants are after the ongoing political drama, which is not yet nearing completion. The impeachment process requires the approval of the Constitutional Court, which has up to 180 days to make a decision. Approval would trigger new elections within 60 days. The South Korean central bank assured on Sunday to stabilize the financial markets and expects less volatility after the vote. The won lost significant value immediately after the martial law declaration, with politicians announcing swift measures to calm the markets. Nonetheless, the currency remained vulnerable, particularly after reports of a renewed martial law plan and after the parliament failed to pass a previous impeachment process.