The Bank of Korea reviewed global financial market moves during the Chuseok holiday, including a sharp rise in U.S. Treasury yields, and assessed their potential impact on domestic financial and foreign exchange markets. With external uncertainties mounting — from shifting expectations for U.S. monetary policy to tensions in the Middle East — the central bank said it would closely monitor market volatility.
The BOK held a market review meeting at 8 a.m. on the 28th, chaired by Deputy Governor Kwon Min-soo, to examine international financial market trends during the Sept. 24-27 Chuseok holiday.
"Stock prices and the dollar in major economies moved relatively little during the Chuseok holiday, but global government bond yields rose considerably on shifting expectations for monetary policy," Kwon said.
Between the 23rd and the 25th, around the holiday, the two-year U.S. Treasury yield rose 10 basis points and the 10-year yield climbed 20 basis points. One basis point equals 0.01 percentage point. German and British 10-year yields also rose 14 and 13 basis points, respectively. Over the same period, the S&P 500 and Nasdaq indexes fell 0.3% and 0.6%, respectively, while the dollar index, which tracks the greenback against six major currencies, gained 0.4%.
Moves in domestic financial markets were more contained. The won weakened 0.1% against the U.S. dollar in the offshore non-deliverable forward market. Korea's credit default swap premium also stayed low at 23.6 basis points as of the 25th. Foreign exchange authorities are nonetheless stepping up monitoring of the NDF market, given the possibility that such trading could amplify currency volatility.
Kwon said domestic economic fundamentals "continue to look sound," but warned that volatility in local financial and currency markets could widen depending on how external risks unfold. He singled out negotiations between the United States and Iran, concerns over fiscal soundness in major economies, and shifting expectations for the artificial intelligence industry as key variables.
"We will maintain a heightened sense of caution and closely monitor market conditions," Kwon said.
