The South Korean won hit a fresh 16-year low and the stock market tumbled on Friday amid increasing political turbulence, while other emerging Asian currencies fell against a strong dollar in thin year-end trade.
Stocks in Seoul fell as much as 1.7% in their third straight session of losses. The won shed up to 1.2% to hit 1,486.7 per US dollar, its lowest since March 2009, as a majority of South Korea’s parliament voted to impeach acting President Han Duck-soo.
The impeachment threatens to further intensify the ongoing political crisis in the country, as the Constitutional Court met for its first hearing on suspended President Yoon Suk Yeol’s short-lived martial law declared on Dec. 3.
South Korean won weakest since March 2009 on increasing political turmoil
The won has lost nearly 13% this year and is the worst performing Asian currency.
Jeff Ng, head of Asia Macro Strategy at Sumitomo Mitsui Banking Corp, said he is bearish on the won over the near term, given the political uncertainty and weak economic data such as foreign equity investments and consumer confidence.
“Any reversal hinges on whether there is a swift resolution to the current risks, as well as a smooth political transition,” Ng said.
Most other regional currencies also lost ground, with the Indonesian rupiah shedding 0.4%, on track for its fourth straight weekly decline. China’s yuan was set to end the week near a 13-month low.
The Malaysian ringgit fell 0.2% on Friday, but remained the only Asian currency that was set to end the year higher.
The Indian rupee weakened to an all-time low. The currency has hit record lows in every trading session this week, pressured by broad strength in the dollar.
The US dollar held steady at a near two-year peak against major peers, after the Federal Reserve signalled slower-than-expected rate cuts in 2025.
“If the Fed does not cut in 2025, or turns more hawkish in an extreme case, this may cause more dollar strength against Asia currencies,” Ng said.
Higher US rates and the dollar’s yield advantage could drive capital out of emerging markets while weakening their currencies.
The Fed’s rate trajectory will also influence regional central banks’ rate outlook. Last week, the Bangko Sentral ng Pilipinas cut rates, while the central banks in Indonesia, Thailand, and Taiwan kept rates steady.
On Friday, equities in Kuala Lumpur rose 1% to their highest since early November, while those in Bangkok rose 0.4%.
American Dollar Exchange Rate