Seoul, South Korea — In a dramatic turn of events, South Korean President Yoon Suk Yeol declared emergency martial law late Tuesday, citing “anti-state” activities by his political opposition. The declaration, the first of its kind in more than four decades, prompted swift action from the national parliament to challenge the order.

South Korea’s national cabinet convened early Wednesday morning and approved a motion to end the martial law declaration within six hours of its implementation. The move came after a majority vote by the National Assembly demanded the withdrawal of military forces.

President Yoon acknowledged the parliamentary decision, announcing that martial law would be lifted as soon as his cabinet achieved quorum. “The National Assembly demanded that martial law be lifted, so I withdrew the military forces that had been deployed to carry out martial law,” Yoon said, according to The New York Times.

Despite his compliance, Yoon strongly criticized the legislative body, accusing it of undermining national stability. “I call on the National Assembly to immediately stop the outrageous behaviour that is paralysing the functioning of the country with impeachments, legislative manipulation and budget manipulation,” he added.

Impact on Financial Markets

The political crisis immediately rattled South Korea's financial markets. The South Korean Won (KRW) fell sharply against the US Dollar (USD), with the USD/KRW pair spiking to a two-year high of 1,444.93 before retreating to around 1,420. The heightened volatility reflected growing risk aversion as investors sought safer assets.

The benchmark Kospi Index plunged 2.3% during Wednesday’s trading session, mirroring widespread investor anxiety. Broader Asian markets were also affected, with the MSCI Asia Pacific Index declining 0.4% amid drops in Australian, Japanese, and Chinese equities.

David Chao, global market strategist at Invesco in Singapore, observed that the situation remains “dynamic and evolving.” He warned that potential cabinet reshuffles and impeachment discussions could fuel further volatility, though he noted these events are “unlikely to have lasting effects on the economy and financial markets."

Central Bank and Opposition Response

The Bank of Korea stepped in to address the crisis, pledging to increase short-term liquidity and intervene actively in currency markets if necessary. Meanwhile, the opposition Democratic Party has accused President Yoon of declaring martial law illegally, vowing to pursue charges of treason and impeachment against him, the defense minister, and the safety minister.

USD/KRW Technical Outlook

The USD/KRW pair remains highly volatile amid the ongoing political uncertainty. Analysts see potential upside risks, with the pair possibly testing the 1,500 threshold if tensions escalate further. Near-term support levels are identified at 1,419.36 and 1,403.68, should conditions stabilize.