US rate freeze to ease uncertainty in Korean economy: finance minister

Korea's finance minister said Thursday that the U.S. Federal Reserve's dovish stance will ease uncertainties in the market and have a positive impact on Asia's fourth-largest economy struggling with shrinking exports.

At the latest monetary decision-making meeting, the U.S. central bank froze the key rate and mentioned a slower pace of interest rate rises than it announced in December last year.

The decision to hold the rate at an ultra-low level for a while boosted investor sentiment in South Korea, pushing up the benchmark KOSPI to touch a three-month high in intraday trading on Thursday.

"I expect some positive effects (of the U.S. rate freeze)," Finance Minister Yoo Il-ho said after a conference in Seoul. "It removed uncertainties in the market to a large extent. And decreased uncertainty is good for an economy."

South Korea has been in a deep slump both in exports and domestic demand, and the financial market has also remained in the doldrums as investors lost their appetite for risky assets.

Foreigners continued their selling spree in February, dumping a net 194 billion won ($162 million) worth of Korean stocks last month amid global financial instability such as a possible interest rate hike in the United States and a stock rout in China and Japan.

Their stock ownership stood at 28.4 percent in overall market capitalization, down from some 30 percent tallied a year earlier.

Also in the foreign exchange market, South Korean currency has been widely volatile in recent months.

Central bank data showed that the average gap between the daily high and low of the won-dollar exchange rate came to 10.4 won this month, the highest since 12.8 won posted in the second quarter of 2010.

It hit a six-year high of 1,238.8 won against the U.S. dollar on Feb. 25.

On Thursday, the won-dollar rate soared 19.5 won to 1,173.8 won as of 2:40 p.m.

"The market stabilized thanks to reduced uncertainties. And the foreign exchange rate must be affected by the stable market," said Yoo, who has pledged to take firm action on currency swings.

The minister added that he will keep close tabs on the market and study the long-term effects of the U.S. rate-freeze decision's on the South Korean economy. (Yonhap)