Won Falls After Unexpected Rate Cut by BoK

  October 27th, 2008 at 11:56, Andriy Moraru

South Korean wonThe South Korean won continued its decline against the U.S. dollar after the Bank of Korea unexpectedly cut the interest rates by the record value of 75 basis points today, struggling against the worst crisis since 1998 Asian financial crash.

The Bank of Korea lowered the country’s benchmark rate from 5 percent to 4.25 percent at an emergency meeting today after cutting the rate by 25 basis points on October 9th. South Korea’s political and financial authorities pledged to stimulate the economy in order to increase the GDP growth pace.

Unlike the Korean won, the country’s stock market reacted with a moderate optimism to the rate cut and posted the first daily gain (0.82 percent) after a week of decline (a total of 21 percent drop). Although today’s growth can be viewed as a minor correction, it’s certainly better for the won than another day of catastrophic decline.

Currency analytics believe that the Korean won has a good chance to recover against the U.S. dollar during the next several months. Timely actions by the Bank of Korea to increase the funds availability to the local companies and the falling prices for the imported goods will serve well to economy of South Korea.

USD/KRW rose from 1424.5 to 1441.1 as of 9:16 GMT today. The currency pair extended its gain to about 36 percent this year, making won the worst-performer among the Asian currencies.

If you have any questions, comments or opinions regarding the South Korean Won, feel free to post them using the commentary form below.

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