SEOUL, July 30 (AJP) -South Korea's central bank said Thursday it would step up monitoring of domestic financial markets, citing mounting uncertainty over U.S. monetary policy and Middle East tensions layered on top of existing investor unease about a possible slowdown in artificial intelligence investment.
The Bank of Korea (BOK) convened an emergency market review meeting at 8 a.m. local time, chaired by Deputy Governor Park Jong-woo, to evaluate global market developments following the U.S. Federal Reserve's latest policy decision and their potential spillover into Korea's financial and foreign-exchange markets. The BOK is South Korea's central bank, responsible for setting monetary policy and safeguarding financial stability.
"Uncertainty related to the Federal Reserve's monetary policy and the situation in the Middle East has increased at a time when concerns over a slowdown in AI investment have already weakened sentiment in domestic financial markets," Park said.
The central bank said it would track how domestic and external risks evolve and assess their effects on Korea's economy and financial markets with what Park called "heightened vigilance."
The BOK's meeting followed the Fed's widely expected decision to hold its benchmark federal funds rate steady at a range of 3.50 percent to 3.75 percent. Three regional Fed presidents — Dallas Fed's Lorie Logan, Cleveland Fed's Beth Hammack and Minneapolis Fed's Neel Kashkari — dissented, favoring a quarter-point rate increase instead.
Fed Chair Kevin Warsh reaffirmed the central bank's commitment to restoring price stability but gave no concrete signal on the timing or direction of the Fed's next move.
Markets read the outcome as adding to uncertainty over the Fed's policy path and the inflation outlook, the BOK said, a reaction that drove a sharp rise in longer-term U.S. Treasury yields.
The Korean central bank warned that the combination of U.S. monetary-policy uncertainty, Middle East tensions and worries over the AI investment cycle could continue to weigh on domestic stocks, bond yields and the won — South Korea's currency.
As of 10:30 a.m., the won was trading at 1,442.7 per dollar, up 4.0 won, or 0.28 percent, from the previous session's close of 1,446.7. Earlier in the session, the won touched an intraday high of around 1,435 per dollar — its strongest level since Feb. 27, when it reached 1,430.5.
The three-year government bond yield edged down 0.1 basis points from the previous close to 3.799 percent, while the 10-year yield rose 2.2 basis points to 4.279 percent.
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