Bank of Korea Boosts Liquidity Injection in Bid to Calm Markets

The Bank of Korea (BOK) has announced a significant liquidity injection to stabilize markets following President Yoon Suk Yeol's brief imposition of martial law. The BOK plans to inject up to 60 trillion won ($42.3 billion) in liquidity, focusing on the purchase of repurchase agreements (RPs) (Number 2). This measure is expected to last until market stability is achieved, with the BOK estimating the scale of RP purchases to be smaller than previous crises, likely not exceeding 10 trillion won. The government also plans to activate market stabilization measures, including a 10 trillion won stock market stabilization fund and programs for purchasing corporate bonds and commercial paper (Number 2). This intervention is expected to improve market sentiment and stability by addressing volatility and uncertainty.

The BOK's liquidity injection comes after a period of increased market volatility, triggered by President Yoon's surprise declaration of martial law. The move, which was later lifted, caused a surge in volatility in the Korean won and financial markets. The BOK's decision to intervene and provide additional liquidity is aimed at calming markets and restoring confidence in the Korean economy.

The BOK's liquidity injection is expected to have a stabilizing effect on the Korean won's exchange rate and the foreign exchange market. The purchase of RPs and the government's bond market stabilization fund will increase market liquidity, reducing volatility and supporting the won's value. This intervention comes after the Korean won weakened to a two-year low of 1,410.1 won per dollar following President Yoon Suk-yeol's brief imposition of martial law. By addressing market concerns and providing ample liquidity, the BOK's measures should help restore confidence in the Korean won and maintain stability in the foreign exchange market.



The BOK's liquidity injection is part of a broader effort by the Korean government to stabilize markets and maintain economic growth. The government has also pledged to provide "unlimited liquidity" to stabilize the markets, working in coordination with the BOK (Number 1). This collaborative approach is aimed at addressing market concerns and restoring confidence in the Korean economy.

The BOK's liquidity injection is expected to have a positive impact on the Korean economy, helping to stabilize markets and maintain economic growth. The increased liquidity is expected to support businesses and consumers, encouraging investment and consumption. However, the BOK's decision to intervene in the market also raises concerns about the potential for increased inflation and currency depreciation. The BOK will need to carefully monitor market conditions and adjust its policies accordingly to maintain a balance between market stability and economic growth.



In conclusion, the Bank of Korea's liquidity injection is a significant step towards stabilizing markets and maintaining economic growth in the face of increased volatility. The BOK's decision to intervene and provide additional liquidity is aimed at calming markets and restoring confidence in the Korean economy. While the BOK's intervention is expected to have a positive impact on the Korean economy, it also raises concerns about the potential for increased inflation and currency depreciation. The BOK will need to carefully monitor market conditions and adjust its policies accordingly to maintain a balance between market stability and economic growth.