(Bloomberg) -- The Bank of Korea stepped up injections of cash into the financial market as it vowed “unlimited liquidity” in the wake of a flare-up in political turmoil.
The central bank added 14.1 trillion won ($9.8 billion) last week via so-called repurchase operations, according to its website. That compares with 18.5 trillion won of such operations throughout November, and just 1.5 trillion won in October.
South Korea’s financial authorities have vowed “all possible measures” to keep markets stable following President Yoon Suk Yeol’s martial law imposition on Dec. 3. In the latest jawboning, Finance Minister Choi Sang-mok said on Wednesday the government is doing its best to keep the foreign-exchange market calm via smoothing operations.
The won has weakened more than 2% since Yoon stunned the nation, underperforming all Asian peers. The currency is hovering near its weakest since 2009. South Korean bond futures rose following the BOK’s operations last week, but remain lower when compared with before the martial law fiasco.
The last time authorities pledged to provide unlimited liquidity was in 2020 when the Covid-19 pandemic hit. Back then, the BOK conducted weekly repurchase agreement transactions aimed at providing unlimited liquidity from March to July. It ended up injecting 19.4 trillion won in the market, according to the central bank’s annual report.
“The current situation of the country isn’t as extreme as during the Covid-19 days,” said Ahn Yea-ha, analyst at Kiwoom Securities Co. The recent political turmoil hasn’t reached a stage that can incur a systemic risk, and local financial institutions’ funding situations aren’t seen as illiquid, she added.
The BOK offered to buy 12 trillion won of bonds via 14-day repurchase operations on Dec. 4, of which 10.8 trillion was successfully bid. It then offered to purchase 4 trillion won on Dec. 6, of which 3.25 trillion won came through.
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