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USD/KRW: Won off 1-week high as Bank of Korea holds for 7th time

The South Korean Won eased against the US Dollar on Thursday, as the Bank of Korea (BOK) left its base rate without change at 3.5% at its November policy meeting, in line with market expectations.

This way, borrowing costs were kept on hold for the seventh consecutive meeting amid global uncertainties as well as concerns over rising household debt.

BOK policy makers noted interest rates would need to be kept higher for longer to curb persistent inflation.

“The (BOK) governor admitted the current policy rate was restrictive, giving a signal to the market that interest rates had passed the peak not just in the United States,” Huh Jae-hwan, analyst at Eugene Investment Securities, was quoted as saying by Reuters.

The Bank of Korea maintained its GDP growth forecast for 2023 at 1.4%, but revised down its 2024 projection to 2.1% from 2.2% previously.

The central bank revised up its inflation forecast for this year to 3.6% from 3.5% previously and that for 2024 to 2.6% from 2.4% previously.

As of 8:47 GMT on Thursday the USD/KRW currency pair was edging up 0.36% to trade at 1,295.85.

Still, the Won has gained 4.21% against the greenback this month, while being on course for its best performance since November 2022. Market players in recent weeks have bolstered bets that the Federal Reserve has probably completed its rate-hiking cycle and may begin cutting interest rates next year, as inflation has begun to abate.

Today’s focus will firmly be on US personal consumption expenditure (PCE) price index data, the Fed’s preferred measure of inflation, which may provide clues on whether the disinflation trend observed so far is still intact.

Yesterday the Won advanced to 1,285.72 per dollar, or its strongest level since November 21st.

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