South Korea won gains 1%, tracking yuan; shares fall as Band of Korea holds

[SEOUL] The South Korean won sharply rose against the dollar by midday on Friday, joining a broader rally against the US dollar led in Asia by the Chinese yuan.

Market reaction was broadly muted after the Bank of Korea kept its policy interest rate steady at a record low of 1.50 per cent early in the session, which had been largely expected.

The market was awaiting a news conference by Bank of Korea Governor Lee Ju-yeol due to be begin at 11.20am (0220 GMT).

The won was quoted at 1,182.6 per dollar, up 1 per cent as of 0153 GMT, after touching as high as 1,181.4, the strongest intraday level since Sept 2.

Jeon Seung Ji, a foreign-exchange analyst at Samsung Futures, said the yuan could lose some of its gains if the BOK governor made dovish remarks.

Seoul shares slid as investors, notably foreigners, took profits following a two-day rally.

The Korea Composite Stock Price Index (KOSPI) eased 0.8 per cent to 1,946.51 points. Losers outnumbered winners by 1.1 to 1. During the last two sessions, it had gained 4.4 per cent, the biggest two-day rise since late-June, 2013.

Foreigners offloaded a net 46.5 billion won (S$55.48 million) worth of shares in the main board by midday, set to extend their selling spree into 27th straight session.

Stock market investors would be also watching the BOK governor's news conference for clues on the chances for rate cuts.

"If BoK signalled an additional rates cut this year today, the signal could bring a positive effect for the domestic stock market instantly," said Cho Byung Hyun, a stock analyst at Yuanta Securities.

"However, in the long run, market would digest the signal as bad news of downturn in local economy."

Market heavyweight Samsung Electronics Co Ltd lost 0.7 per cent, and Hyundai Motor Co Ltd edged up 0.6 per cent. Steel maker Posco slipped 2.1 per cent.

September futures on three-year treasury bonds were down 0.04 point at 109.63.

REUTERS