South Korea’s finance minister, Choi Sang-mok, led emergency response efforts as the country faced its worst crisis in decades. Hours after President Yoon Suk Yeol declared martial law, Choi set up an emergency meeting with top policymakers from the central bank, finance ministry, and banking regulators to defend the currency.
The Bank of Korea activated a crisis playbook used during past financial crises, injecting unlimited cash into markets as needed. The move pulled the won back from lows last seen in 2009 during the global financial crisis. Choi’s plan was influenced by lessons learned from the 1998 Asian financial crisis and a detailed contingency plan that includes various market scenarios.
The government has weathered several crises since South Korea was last under martial law, including the COVID-19 pandemic, and has a set of tools in place to address economic instability. The F4 agencies intervened this heavily in markets only in 2020 during the pandemic, highlighting the severity of the current situation.
Despite opposition from Choi, who had previously served as Yoon’s conservative loyalist, the plan largely worked. The won recovered from two-year lows, and Korea’s stock market lost just over 2.5% over the past three days. BOK Governor Rhee expressed relief, stating that the swift action prevented a significant impact on foreign investors’ perception of South Korea.
The government’s response has been praised as a textbook example of crisis management, with Choi serving as the “control tower” directing messaging and responses throughout the crisis.
Source: https://www.reuters.com/markets/currencies/south-koreas-crisis-playbook-currency-stability-is-paramount-2024-12-06