South Korea’s won advanced to the strongest level in more than six months as the central bank kept its policy rate at the lowest since 2010 to support economic growth. Government bonds gained.
The Bank of Korea today held its seven-day repurchase rate at 2.5 percent, as predicted by all 15 economists in a Bloomberg News survey, following a quarter percentage-point cut in May. The won also appreciated after Chinese Premier Li Keqiang said Asia’s largest economy can achieve its main economic targets this year. China is South Korea’s biggest export market.
“The central bank will keep a dovish tone for now because it may not have much leeway to cut interest rates from here,” given the risk to capital outflows from emerging markets, said Suresh Kumar Ramanathan, a regional currency strategist CIMB Investment Bank in Kuala Lumpur. “That will at least support growth, as there are expectations for Korea to ride on the coat tails of U.S. and Chinese economic recoveries.”
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