SEOUL: South Korea's central bank on Thursday kept the key interest rate unchanged at 2.0 percent for November, as its governor warned over a "worrisome" drop in the Japanese yen and its possible impact on exports.
The decision came after the Bank of Korea cut the overnight inter-bank lending rate in August and October.
The 2.0 percent rate matches a record low last seen from February 2009 through June 2010, when Asia's fourth-largest economy was seeking to recover from the global financial crisis.
Signs of slowing growth posed an increasing challenge to Seoul policymakers, with a weak yen hurting the price competitiveness of South Korean firms against Japanese rivals in overseas markets.
In a statement, the BOK forecast that the global economy would "sustain its modest recovery going forward" but warned of destabilising variables like sluggishness in the eurozone and slowing growth in some emerging markets.
BOK governor Lee Ju-Yeol said authorities were "closely monitoring" the movement of the yen.
"It appears that price competitiveness of industries directly competing against Japan such as car, machinery and steelmaking has been weakened," Lee told reporters.
Exports, which account for more than half of the country's economy, have been solid so far, he said, but warned that further depreciation of the yen may lead to a "worrisome situation".
The yen has lost more than 10 percent against Korean won this year due to Tokyo's monetary easing policy aimed at shoring up the Asia's second-largest economy.
A decision by the Bank of Japan last month to pump as much as 20 trillion yen ($182 billion) into its financial system sent the yen plunging against major currencies, including the won.
The BOK last month slashed its growth forecast for this year to 3.5 percent from 3.8 percent, following growth of three percent in 2013.
It also lowered the growth estimate for 2015 to 3.9 percent from four percent.
The central bank expects inflation to accelerate to 1.9 percent in 2014 following a 1.3 percent increase in 2013 -- the slowest for 14 years.
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