Rate cut unlikely for Korea despite Won strength hurting exports

A familiar theme back in Q4 2012, it seems that the trend of Asian/Emerging currencies strengthening could continue especially should Central Banks refrain from cutting rates in fear of inflation.

The Bank of Korea may refrain from cutting rates at its first meeting since President Park Geun Hye’s election even as Asia’s best-performing currency of the past year threatens exports and a weakening yen aids Japan.

All 10 economists surveyed by Bloomberg News forecast borrowing costs will remain at 2.75 percent on Jan. 11. At the same time, seven of 16 economists in a separate survey see a 25 basis-point reduction by March.

The government led by incoming President Park already plans a fiscal boost in the first half of the year by allocating 72 percent of budget spending for 2013, or $200 billion. In Japan, new Prime Minister Shinzo Abe is driving down a yen that has fallen about 20 percent against the won in the past year, aiding Japanese exporters of cars and electronics. South Korea’s currency is up 9.3 percent against the dollar.

Via – Bloomberg

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