SINGAPORE: South Korea's won slid on Thursday as the central bank chief repeated concerns over the impact on the local economy of the yen's weakness, given that the Japanese currency is sliding again.
Earlier, the Bank of Korea unanimously voted to leave its policy interest rate unchanged at 2.00 percent, which helped the won recover losses.
But the relief did not last long as the yen weakened amid the dollar's strength against major currencies, especially the Australian dollar.
"If the yen keeps weakening, there will be changes in the marketing strategies in Japanese companies. We are concerned about the negative effects that may follow," Bank of Korea Governor Lee Ju-yeol said at a news conference.
The sliding yen has caused worries about a loss of competitiveness for South Korean exports against Japan, at a time when Asia's fourth-largest economy is already slowing.
The won pared some of its losses as Lee said the central bank is unable to respond to foreign-exchange rate changes with interest rate policy.
The comments caused investors to reduce some bets on a further cut in borrowing costs, traders and analysts said.
Still, the won is expected to stay under pressure from the yen's weakness, analysts said.
"Reducing rate-cut bets is unlikely to support the won for a longer term on sustained expectations that the authorities would keep the won in line with the yen," said Jeong My-young, Samsung Futures research head in Seoul.
TAIWAN DOLLAR
The Taiwan dollar gained as exporters bought it for settlements between 30.630 to the US dollar and 30.650.
The island's currency also found support from stock inflows.
Traders stayed cautious over possible intervention by the central bank to curb strength in the Taiwan dollar.
On Wednesday, the Taiwan dollar ended local trade at 30.750, its weakest since December 2010 as traders said the central bank was spotted intervening just before the domestic market closed.
Comments
Comments are closed for this article.