Korean stocks and the won fall after U.S. inflation report

Electronic display boards at Hana Bank in central Seoul show the market on Wednesday. [NEWS1]

Korean stocks and the won fell after a U.S. report that showed higher-than-expected inflation.

The Kospi fell 1.53 percent on Wednesday and Kosdaq down 1.81 percent, with institutions and foreign investors selling.

The won fell 1.01 percent to 1,282.2.

U.S. inflation was 6.4 percent in January, according to the consumer price index report released Tuesday. Inflation slowed from 6.5 percent in December but was higher than the 6.2 percent that was expected.

Excluding volatile food and energy, the core inflation was 5.6 percent in the same period, higher than the estimate of 5.5 percent.

The S&P500 closed down 0.03 percent and Nasdaq up 0.57 percent on Tuesday.

“The January CPI showed inflation is stickier than had been expected,” said Lee Eun-taek, an analyst at KB Securities. “Prices are projected to fall relatively fast in the first half, though the decline won’t be as steep in the second half.”

Lee said housing prices are projected to decelerate in the first half, while energy prices will likely rebound in the second half.

The U.S. housing market cooled last year after mortgage rates more than doubled from historic lows.

China’s reopening in the first half will increase demand for energy, but that will be offset by a global economic slowdown. In the second half, a rise in the movement of China and global economic recovery could drive up energy prices, Lee added.

Despite the higher-than-expected inflation, the Bank of Korea is projected to hold rates unchanged next week.

“The Monetary Policy Board is expected to keep the rate unchanged in the upcoming meeting next week,” said Lee Jeong-hoon, an analyst at Eugene Investment.

“One of the biggest reasons the board took a ‘big step’ last year was due to the volatility in the currency exchange market. But the rate has stabilized and the difficulties in the domestic economy will make it difficult to raise the rate.”

The won peaked at 1,444.2 in October, up more than 10 percent in just two months. It fell rapidly following the Jackson Hole Economic Symposium in August.

The Monetary Policy Board meeting is scheduled to take place on Feb. 23.

Korea’s base interest rate is 3.50 percent, lower than the federal funds rate in the 4.50-4.75 percent range.

BY JIN MIN-JI [jin.minji@joongang.co.kr]