South Korea to stabilize markets after Fed rate hike

By Park Sae-jin Posted : December 15, 2015, 14:04 Updated : December 15, 2015, 14:04

Bank of Korea [Courtesy of Bank of Korea]



South Korea's financial authorities will undertake round-the-clock monitoring of global markets during and after this week’s crucial meeting of U.S. Federal Reserve.

Barring a shock, the Federal Reserve will raise U.S. interest rates on Wednesday for the first time since June 2006, a full year before the global financial crisis began.

Investors have mostly priced in a rate hike this week, with the main question now hinging on how many increases will follow next year.

A majority of traders predict that the Fed will lift its targeted rate range from 0.25 percent to 0.50 percent at the two-day policy-setting meeting ending on Wednesday, from the current zero to 0.25 percent range.

On Tuesday, Asian shares firmed as recently volatile crude oil prices showed some stability, though gains were limited by caution ahead of the Fed meeting.

The Bank of Korea has said it would hold a meeting after this week's Federal Reserve interest rate decision and stood ready to implement market stabilization measures if necessary.

"If we feel that volatility in financial and foreign exchange markets are overdone, we will seek market stabilizing measures after discussions with authorities," the central bank said in the statement on Monday. .

Analysts say South Korea, Asia's fourth-largest economy, is unlikely to see a major capital outflow from a Fed rate hike given the strong economic fundamentals, which include massive foreign exchange reserves and a current account surplus.

However, local financial authorities said they would remain highly vigilant for any shocks that may spill over from other emerging markets if U.S. interest rates are raised.

By Alex Lee

 
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