The central bank held a market review meeting at 8 a.m., chaired by Deputy Governor Kwon Min-soo, to assess international market developments during the Sept. 24-27 holiday and their potential impact on Korea’s financial and foreign exchange markets.
The BOK said expectations for a Federal Reserve rate increase strengthened during the period, while tensions in the Middle East resurfaced and oil prices fluctuated.
Between Sept. 23 and 25, U.S. two-year Treasury yields rose 10 basis points and 10-year yields climbed 20 basis points. German and British 10-year government bond yields increased 14 and 13 basis points, respectively.
U.S. Treasury data showed the 10-year yield at 5.17 percent and the 30-year yield at 5.49 percent on September 25, the latest trading day.
The S&P 500 fell 0.3 percent, the Nasdaq declined 0.6 percent and the Euro Stoxx 50 lost 0.3 percent, while the U.S. dollar index gained 0.4 percent.
“Movements in major-country stock prices and the U.S. dollar were relatively limited during the holiday, but global government bond yields rose considerably on changes in monetary policy expectations, heightening uncertainty in international financial markets,” said Kwon Min-soo, deputy governor of the BOK.
The Korean won weakened 0.1 percent against the dollar in offshore non-deliverable forward trading during the holiday. The won was trading at around 1,361 per dollar Monday morning, slightly weaker than its September 23 daytime close of 1,358.4.
Kwon said Korea’s economic fundamentals remained sound, but volatility in domestic financial and foreign exchange markets could increase depending on developments in U.S.-Iran talks, concerns over fiscal sustainability in major economies and shifts in expectations for the artificial intelligence industry.
The BOK plans to maintain heightened vigilance and closely monitor domestic financial and foreign exchange market conditions.
AJP Takeaways
- The Bank of Korea said global government bond yields rose during the Chuseok holiday as Federal Reserve rate-hike expectations strengthened and Middle East tensions resurfaced.
- The Korean won weakened 0.1 percent against the dollar in offshore NDF trading, while Korea’s CDS premium remained low at 23.6 basis points as of Sept. 25.
- BOK Deputy Governor Kwon Min-soo said Korea’s economic fundamentals remained sound but external risks could increase volatility in domestic financial and foreign exchange markets.
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