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Bank of Korea's monetary policy to focus on cementing recovery

All Headlines 12:00 March 30, 2010

SEOUL, March 30 (Yonhap) -- South Korea's central bank will focus its monetary policy on helping cement a recovery this year while paying heed to price rises as the economy regains steam, the bank said Tuesday.

"The Bank of Korea (BOK) will manage the key benchmark interest rate in a way that helps sustain the economic recovery trend," the central bank said in an annual policy report.

The bank predicted the recovery will gain traction down the road as the private sector gathers momentum from household spending and corporate investment.

The bank will also take heed of potential imbalances stemming from keeping expansionary monetary policy for an extended period of time, adding "upward pressures on prices will surge in the second half of the year due to growing demand".

As the global and domestic financial risks receded, the bank parked a bigger share of its foreign-currency reserves in profit-seeking assets last year and reduced holdings of easily cashable assets, which was expanded the previous year as the economy sought liquidity amid a financial rout, it said.

As of the end of 2009, 84 percent of foreign-currency reserves held and managed by the BOK was invested in profit-making assets, up from 76.1 percent a year earlier while 1.9 percent was parked in liquid assets, compared with 5.8 percent as of end 2008, according to the BOK report.

The bank held 63.1 percent of its foreign reserves in the U.S. dollar as of end-2009 after lowering it from 64.5 percent a year earlier to prevent volatile value changes of the reserves owing to dollar-currency swings, the central bank said.

The country's foreign exchange reserves stood at US$270 billion at the end of 2009, the sixth-largest holding in the world.


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