South Korean won plummets after martial law is declared

NEW YORK/LONDON, Dec 3 (Reuters) – The Korean won was among the strongest performers on Tuesday, tumbling against the U.S. dollar after South Korea’s president declared martial law in an unannounced late-night televised address.

Meanwhile, the euro, which has been making headlines of late, rebounded against the greenback as political unrest in France prompted traders to look for a hedge against further price swings.

The dollar, however, briefly rose after data showed U.S. job openings rose moderately in October while layoffs fell.

But it was the won that caught the market’s attention as political news came out of left field.

South Korean President Yoon Suk Yeol said he had no choice but to resort to martial law to protect liberal democracy, saying opposition parties had taken the parliamentary process hostage and plunged the country into crisis.

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The South Korean currency fell as low as 1,443.40 won per dollar, its lowest level since October 2022. It was last down 1.9% at 1,430.72.

“That of course makes sense if the Korean won goes down while we all assess what exactly the emergency is. “Usually that doesn’t happen unless there’s a lot of fear or concern that the country’s stability is obvious,” said Juan Perez, trading director at Monex USA in Washington.

“When there is chaos in Asia, it makes a lot of sense to bet on the yen, and a lot of the funds that are normally invested in Korea are actually flowing into Japan, and I think you are already seeing an unusual jump in favor of that Yen.”

The dollar fell 0.3% against the yen to 149.12 yen, while the euro also fell, falling 0.2% to 156.77 yen. Traders are increasingly confident that Japan could raise interest rates this month.

The won fell against the yen to its lowest level since May 2023, last trading 2.2% at 1,043 won.

The euro, which was the weakest G10 currency until November, began this month with a 0.7% decline on Monday and was last up 0.2% at $1.05185 as the French government responded to a budget crisis heading for collapse. EUR/GVD

French Prime Minister Michel Barnier faces a vote of no confidence on Wednesday after fierce opposition from across the political spectrum to his budget, which includes painful tax hikes and spending cuts to repair the country’s precarious financial situation.

Demand for hedging, reflected in euro options volatility, has reached its highest level since March 2023 this week, and with the combination of a string of weak data, policy uncertainty in major euro zone economies and the seemingly unstoppable dollar the single European currency could emerge.

Watching the Yuan

The Chinese yuan, another currency to watch under new U.S. President Donald Trump, fell to its lowest level in 13 months amid tariff risks and weakness in China’s economy.

The yuan had already sold off on expectations of more tariffs from Trump and improving U.S. manufacturing data, and a fall in Chinese bond yields to record lows has pushed the currency to 7.3 per dollar for the first time since last November.

China set the yuan’s trading range at its weakest in more than a year and traders followed suit to sell the currency at 7.2996 per dollar. The Chinese unit last traded at 7.2850 per dollar, down slightly 0.2%. On Friday it traded at 7.24.

The US dollar index remained little changed and was slightly in the red over the course of the day at 106.34. It pared losses after data showed the number of job openings, a measure of demand for workers, rose 372,000 to 7.744 million through the last day of October, the Labor Department’s Bureau of Labor Statistics said in its Job Openings and Labor Turnover Survey (JOLTS report).

“The Fed’s Dec. 18 decision will be close, but if a majority of voting members prioritize the employment mandate, markets should expect a cut in interest rates, encouraging risk appetite,” wrote Jeffrey Roach, chief economist at LPL Financial, in emailed comments.

According to LSEG calculations, U.S. fund futures have priced in a 70 percent chance of a 25 basis point cut this month and a 30 percent chance of a break, little changed since late Monday.

The dollar typically suffers seasonal weakness in December as companies tend to purchase foreign currencies. However, traders are watching the new Trump administration and its support for the dollar with caution this year.

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South Korean won plummets after martial law is declared

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