By Kim Soo-yeon SEOUL, June 17 (Yonhap) — South Korea will closely monitor the financial market as market volatility could increase following the Federal Reserve’s signal of an earlier-than-expected rate hike, a senior government official said Thursday. After freezing its key rate at near zero at a policy meeting, the Fed signaled an earlier-than-expected rate increase in 2023 as U.S. inflation is rising amid an economic recovery. The U.S. central bank also hinted it began discussing when to taper bond-buying programs. Bearing the Fed’s surprise results, South Korea’s key stock index, the KOSPI, was trading 17.17 points, or 0.52 percent, lower at 3,261.51 as of 11:22 a.m. The Korean currency was trading at 1,127.90 won per U.S. dollar, sharply down 10.70 won from the previous session.
The Bank of Korea (BOK), the country’s central bank, said it plans to take steps to stabilize the financial market if needed.
The country has beefed up its capability to secure FX liquidity in a bid to brace for unexpected market routs.
South Korea’s FX reserves rose to a record high of US$456.4 billion in May, up $4.15 billion from the previous month, according to central bank data.
The BOK and the Fed agreed Wednesday to extend their $60 billion currency swap agreement by another three months through Dec. 31.
The two nations opened the swap line in March 2020 and have extended it twice in a bid to help ease potential FX liquidity shortage amid the pandemic.