The U.S. Federal Reserve will soon ready the markets for a rate hike... marking a turn against the global trend of monetary easing.
For more on the potential impact on the Korean economy,... here's our Hwang Ji-hye.
Investors broadly forecast... that the U.S. Federal Reserve will signal on a rate rise in June,... by dropping the word "patient" from its official policy statement set to be released on Wednesday, local time.
Improving jobs data is stoking such expectations.
"There's been a clear trend towards improvement. We saw that in the February payrolls that we received recently, so I think the odds are that they will remove 'patient' from the statement indicating that they're within a couple of meetings of that initial rate hike."
But... the surging U.S. dollar... that came on the back of such forecasts, and the European Central Bank printing more euros... is clouding the timing of a rate rise.
The soaring greenback erodes the price competitiveness of U.S. exporters in the global market... and could hurt the pace of recovery.
The Fed's next move also comes in an environment of sluggish global demand... and slowing growth... where more than 20 central banks across the globe have eased policy this year to revive ailing economies.
And Korea... is no exception.
"The Fed's decision on its key rate has largely affected Korea's key rate, but now Korea's interest rate is more affected by monetary policies in regions other than the U.S."
There are concerns though of a massive capital outflow from Korea... in the face of the Fed's possible rate hike... and a record-low key rate.
The good news is... that Korea is now less vulnerable to such risks.
"Korea continues to post a current account surplus and this leads to increasing foreign exchange reserves... that will help Korea absorb shocks coming from capital outflows."
The Bank of Korea governor, however, has cautioned against too much optimism,... saying the central bank will closely monitor risks related t
