Thursday in Asia, the South Korean won jumped against its US and Japanese counterparts on higher stock prices and as expected the Bank of Korea held interest rates unchanged at a record low.
The stock market in South Korea opened higher and is trading in positive territory today, taking cues from Wall Street, where the major indices ended in positive territory amid choppy trading, on expectations of a global economic recovery.
The benchmark KOSPI Index opened today's session at 1,274, higher than its previous close of 1,1262, and is currently trading at 1,290, up 2.25% or 28.40 points.
As expected, the Bank of Korea decided to leave interest rates unchanged at a record low of 2% today. In its March meeting also, the central bank held its rates steady. But the bank had trimmed rates by 50 basis points to 2 percent in February, marking the sixth rate cut in the previous four months.
Consumer price inflation has been decelerating thanks to the stable movements of international oil prices coupled with the easing of demand-pull pressures owing to the economic downturn and this trend seems set to continue for some time, the central bank said in a statement accompanying the rate decision. In the real estate market, prices and transaction volumes have continued to decline.
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The BoK had pared rates by 25 basis points on October 9 and then slashed them again by 75 basis points in an emergency meeting on October 27. Then on December 11, the bank slashed rates by another 100 basis points in the largest rate cut in the bank's history - since it started adopting a benchmark interest rate in 1999. On January 9, the bank trimmed rates by 50 basis points to 2.50 percent.
Before raising rates in August to combat inflation, the board had left interest rates at 5.00 percent for 11 straight meetings.
Meanwhile, Korea Credit Guarantee Fund, the state-run credit guarantee agency, in a statement revealed today that in an effort to ease credit crunch, it is planning to sell up to 1 trillion won, equivalent to $475 million, in debts backed by a pool of bonds issued by smaller companies in the country with relatively low ratings.
Another report from the Bank of Korea showed today that South Korea's producer price index rose 3.5% year-on-year in March, at a slower pace compared to a 4.4% rise in the previous month. This marks the slowest rise in producer prices since a 3.1% increase in November 2007. Month-on-month, producer prices were up 0.5% in March compared to a 0.6% increase in February.
The South Korean won climbed to 1328.60 against the US dollar in Asian trading on Thursday. If the Korean currency strengthens further, it may test near term resistance around the 1309.5 level. At yesterday's close, the dollar-won pair was quoted at 1349.80.
The US February trade balance, import and export price index for March and the weekly jobless claims reports are expected to influence trading in the New York session today.
During Asian deals on Thursday, the South Korean won strengthened to 13.3145 against the Japanese yen. This may be compared to Wednesday's closing value of 13.5295. On the upside, 13.25 is seen as the next target level for the Korean currency.
In economic news from Japan, core machine orders unexpectedly climbed 1.4 percent in February compared to the previous month, the Cabinet Office said. That snapped a four-month string of decline, which was the stat's longest losing streak ever. The February figure came in higher than analyst expectations for a 6.9 percent decline after the 3.2 percent fall in the previous month.
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