The Bank of Korea will keep its benchmark interest rate unchanged this week, running counter to forecasts by some economists for a quarter-percentage point reduction, according to Barclays Plc’s investment banking unit.
A central bank decision to hold borrowing costs may provide some support to the won, which lost 6.6 percent against the dollar this year as a slide in the yen threatened South Korean exports and as tensions with North Korea increased, Barclays analysts including London-based Chris Walker wrote in a report yesterday. The BOK’s monetary committee, chaired by Governor Kim Choong Soo, meets April 11.
Government bond yields have fallen to record lows as nine out of 23 economists surveyed by Bloomberg predicted policy makers will cut the seven-day repurchase rate to as low as 2.25 percent this quarter from 2.75 percent. The amount paid by three-year government bonds fell four basis points to 2.44 percent on April 5, data compiled by Bloomberg show.
The yen tumbled to the lowest level since 2009 against the dollar after the Bank of Japan (8301) under its new governor, Haruhiko Kuroda, announced a plan last week to double monthly bond purchases to 7 trillion yen ($73 billion). The BOK said on April 4 that a sharp depreciation of the yen may hurt South Korean exporters as relative gains in the won erode competitiveness. South Korea said today the communist North may be preparing to conduct simultaneous nuclear and missile tests.
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