BOK's monetary board to increase short-term liquidity through repurchase agreements

SEOUL, Dec. 4 (Yonhap) -- The monetary policy board of the South Korean central bank vowed Wednesday to provide "ample liquidity" to the market through repurchase agreements and other means in an effort to minimize the impact of political turmoil on the financial and the foreign exchange markets.

The board at the Bank of Korea (BOK) made the decision after holding an extraordinary session, chaired by BOK Gov. Rhee Chang-yong, to discuss ways of stabilizing the markets following President Yoon Suk Yeol's shocking imposition of martial law, which was later lifted.

"The BOK will provide ample liquidity temporarily until the financial and foreign exchange markets become stable. Starting Wednesday, we will boost the supply of short-term liquidity by buying repurchase agreements," the bank said in a release.

A repurchase agreement is a deal whereby one party sells the other a security at a specified price with a commitment to buy the security back at a later date.

The board will also be prepared to provide loans swiftly, when needed, the BOK said, vowing to implement "various other measures" to stabilize the exchange rate.

"Given the solid fundamentals and strong financial soundness of our economy, market sentiment is expected to be stabilized. But the board will closely monitor the market situation and actively take additional measures," the BOK said in a release.

Following the imposition of martial law Tuesday, financial authorities have pledged to mobilize "all possible market stabilization measures," including "the injection of unlimited liquidity."

Yoon declared emergency martial law in a surprise late-night address on Tuesday, accusing the opposition side of conducting "anti-state activities."

He lifted the military rule only hours later after the National Assembly voted 190-0 to reject it in the wee hours of Wednesday.

The foreign exchange market has shown high volatility following the martial law imposition, with the won plunging to its lowest level in more than two years during offshore trading overnight.

The Korean won traded at 1,413.6 won against the U.S. dollar at 11:20 a.m., down 10.7 won from the previous session.

graceoh@yna.co.kr
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