According to Odaily, the South Korean government has announced its readiness to provide unlimited liquidity to the market if necessary. This move is seen as a precautionary measure to stabilize the financial environment during times of significant political upheaval or transitions in power. Brad Bechtel, the Global Head of Foreign Exchange at Jefferies, noted that South Korea's leadership has previously employed such strategies during periods of political instability. However, he expressed concerns about the current situation, suggesting that the South Korean won is likely to remain volatile in the near term.
The potential volatility of the won is largely contingent on the reactions of foreign investors to the South Korean stock market. Should these investors begin to sell off their holdings significantly, it could lead to a depreciation of the won against the US dollar, potentially reaching an exchange rate of 1450 won per dollar. This scenario underscores the delicate balance South Korea must maintain to ensure economic stability while navigating political challenges. The government's commitment to providing liquidity is aimed at reassuring markets and preventing a sharp downturn in investor confidence.