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Korea's Foreign Currency Deposits in June Reach Record Low

14 July 2017

South Korea's foreign exchange deposits posted their largest ever decline in June, following a slight rise in May, central bank data showed on Friday, as businesses sold the dollar after its recent gains against the won.

After five years of accommodative policy, most analysts expect the BOK to take a hawkish turn next year in a more gradual approach to exiting low rates than some of its counterparts in Europe and Canada.

The Bank of Korea's governor Lee Ju Yeol said gross domestic product will expand 2.8 per cent this year, close to the country's potential growth rate.

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The RoK government submitted the extra budget to the National Assembly in June, though parliament has yet to review the bill due to a political standoff.

Lee said there were downside risks such as trade protectionism in major trading partners such as the United States and geopolitical uncertainties over North Korea's nuclear and missile threats.

The BOK attributed the on-month decrease mainly to a fall in US dollar deposits by exporters.

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He said inflation will fluctuate around 2 per cent for some time.

"As the inflationary pressures on the demand side are not expected to be high even though the domestic economy is expected to show solid growth, the board will maintain its stance of monetary policy accommodation", the rate-setting body said in an English-language statement. It also hinted that it will not raise the rate anytime soon. According to a Korea Financial Investment Association (KFIA) survey of 200 fixed-income experts, 98 per cent of respondents predicted a rate freeze.

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Korea's Foreign Currency Deposits in June Reach Record Low