Lee Ju-yeol "Market Volatility May Increase Depending on the Development of Wuhan Pneumonia"

Bank of Korea Holds 'Financial and Economic Situation Review Meeting' on Last Day of Lunar New Year Holiday

[Image source=Yonhap News]

[Asia Economy Reporter Kim Eun-byeol] The Bank of Korea announced that on the afternoon of the last day of the Lunar New Year holiday, the 27th, at 2 p.m., it held a 'Financial and Economic Situation Review Meeting' to assess the progress of the novel coronavirus infection in China (Wuhan Pneumonia), the reactions of international financial markets, and the impact on financial and foreign exchange markets.

During the Lunar New Year holiday period, international financial markets showed signs of weakened investor sentiment and strengthened preference for safe-haven assets due to growing concerns over the global spread of Wuhan Pneumonia.

The yield on the U.S. 10-year Treasury note fell by 9 basis points (1bp = 0.01 percentage points) as of 11 a.m. that day amid the spread of safe-haven asset preference, and U.S. stock prices also showed weakness during the holiday period. As of 11 a.m. that day, Dow Jones Industrial Average futures were down 0.8%, and Japan's Nikkei 225 index fell 1.7%.

During the holiday period, the U.S. dollar also strengthened by 0.1% due to increased demand for safe-haven currencies. West Texas Intermediate (WTI) crude oil prices dropped by as much as 4.7%, while gold prices rose 1.0% influenced by the preference for safe-haven assets.

South Korea's credit default swap (CDS) spreads and foreign currency bond risk premiums remained firm, while the Korean won (offshore non-deliverable forward, NDF) showed weakness. The Bank of Korea explained that while Korean bond spreads remained stable, the NDF weakened due to the strength of the U.S. dollar.

Bank of Korea Governor Lee Ju-yeol urged, "As the situation of Wuhan Pneumonia develops, volatility in domestic financial and foreign exchange markets may increase. Therefore, please monitor domestic and international market trends with vigilance and closely examine the potential impact on our economy."