The Korean won fell Thursday to its weakest levels against the US dollar since the 2009 global financial crisis as the dollar strengthened after the US central bank signaled a slower pace of rate cuts, fueling concerns over further depreciation as markets continue to digest political turmoil unfolding here.

The Korean currency opened at 1,453 per dollar, down 17.5 from the previous session. This is the first won slide to breach 1,450 against the greenback in over 15 years, since March 16 in 2009. As of 2:20 p.m., the won was quoted at 1,449.10 per dollar in onshore trade.

The decline in the won came after the US Federal Reserve’s overnight decision to cut rates by a quarter point while penciling in just two rate cuts next year.

The currency was mired in political uncertainty after President Yoon Suk Yeol briefly imposed martial law on Dec. 3, hitting the 1,440 level the following day but recovering to around 1,430.

On Wednesday, the US Fed slashed interest rates by a quarter point, bringing the target range to between 4.25 percent and 4.5 percent. With the decision, the interest rate gap between the US and South Korea has now fallen to 1.5 percentage points from 1.75 as the BOK’s policy rate stands at 3.0 percent.

The US central bank also indicated that there will be two reductions in 2025, compared with the four forecasts in September, marking a hawkish signal that could inject volatility into stock and bond markets.

While external uncertainties such as the direction of the new US government's economic policy and geopolitical risks continue, the Federal Reserve's monetary policy easing is expected to be significantly delayed given last night's FOMC results, Bank of Korea’s Senior Deputy Governor Ryoo Sang-dai said.

“Volatility in domestic financial and foreign exchange markets has shown signs of abating after heightening in the wake of the martial law declaration. But if the volatility in the markets increases excessively due to the coincidence of external uncertainty and the domestic political situation, we will make every effort to implement market stabilization measures swiftly,” he said.

The sharp drop in the won deflated hopes for its rebound to previous levels with investors waiting for clearer signals regarding the stability of the currency.

NH Securities & Investment Economist Ahn Ki-tae said that the US dollar would continue to demonstrate strength as US President-elect Donald Trump’s proposed tariffs on China, Canada and Mexico could raise prices for US consumers.

“Considering the exchange rate, it is still difficult to expect a steady inflow of foreign investment funds into the Korean stock market,” he said.

Woori Bank economist Min Kyung-won expected that the Korean currency could depreciate to 1500 against the greenback in the short term.

“A decline in risk-taking appetite is inevitable as uncertainty about Korea’s monetary policy deepens next year and capital inflow into safe assets like the dollar is expected to continue,” he said.

In an abrupt decision, the country’s state pension fund, the National Pension Service and the BOK have agreed to expand their foreign exchange swap line and extend it by one year until the end of next year.

With the enhanced upper limit, the NPS can borrow up to $65 billion from the BOK foreign reserves when undertaking overseas investment

This is because the NPS’ high volume of dollar purchases for overseas assets could further exacerbate won depreciation.

Separately, Korea’s financial authorities decided to relax regulatory measures on soundness and capital reserve on banks and other financial firms to facilitate liquidity inflow into the real economy, including domestic companies.

The stress capital buffer, a regulation that requires banks to increase their capital to maintain normal operations during a crisis, was scheduled to be toughened this month but postponed until the second half of next year.

Some 17 banks and eight financial holding firms were subjected to the strengthened rule, requiring them to set aside an additional 2.5 percentage points of their assets as a stress capital buffer