The South Korean won did not get to Monday’s two-year low in a single day. Its slide is the culmination of a chain of events that began hours earlier, when President Yoon Suk Yeol declared martial law. The currency, issued by the Bank of Korea and in circulation since 1962, had been trading in a relatively stable band for months. Then came the decree. Markets reacted within minutes.
Several Exchange-Traded Funds on the Korea Exchange also hit a one-year low. That is a different metric — a different time horizon — but it tells the same story: a sudden, sharp loss of confidence. The won itself has not seen these levels in two years. The last time it was this weak, the global economic picture was markedly different, and no martial law decree hung over the country.
The currency has a complicated past. It was replaced by the South Korean hwan between 1953 and 1962, then reintroduced. It is technically divided into 100 jeon, though the jeon has been effectively dead in daily use for a long time. None of that history matters much to a trader watching the exchange rate tick down. What matters is that the won is now the weakest it has been since the last crisis.
The declaration of martial law by President Yoon Suk Yeol is the immediate cause. The report does not specify the reasons for the declaration, nor its full scope. What is clear is that the move has rattled investors. The Korea Exchange, the country’s primary stock exchange, is feeling the pressure. ETFs — baskets of stocks that trade like single shares — have fallen hard. One-year lows are not normal. They signal that the market is pricing in a risk it had not priced in before.
Investors and analysts are watching closely. The question on their minds is not whether the won will recover, but what the Bank of Korea will do. The central bank is under pressure to respond. It has tools — interest rates, currency intervention, liquidity measures — but each comes with trade-offs. Raising rates to defend the won could choke off domestic demand. Letting the won slide could fuel inflation and hurt importers. There is no clean option.
The United States is a key ally of South Korea. Trade between the two countries is substantial. A weaker won makes South Korean exports cheaper for American buyers, but it also makes American goods more expensive for South Koreans. The broader concern is stability. If the currency keeps falling, it could strain the trade relationship. The report notes that concerns are growing about the potential impact on trade with the U.S. and other partners.
Martial law is a drastic step. It raises questions about the country’s political stability and, by extension, its economic stability. Investors do not like uncertainty. They tend to sell first and ask questions later. That is what appears to be happening now. The won’s decline is not a slow erosion; it is a fast drop triggered by a single event. The event is martial law. The consequence is a currency at a two-year low and ETFs at a one-year low.
The details of the martial law decree are still emerging. The report does not give them. But the market has already delivered its verdict. The won is down. The ETFs are down. The Bank of Korea is watching. The United States is watching. Everyone is watching.
