S.Korea expected to cut policy rate further from record-low

South Korea's central bank is expected to cut the policy rate further in June from the current record-low level due to lackluster exports, market watchers said Friday.

Nomura International said in a report that the Bank of Korea ( BOK) would lower the benchmark interest rate by a quarter percentage point to 1.5 percent in June on the back of weak exports that were forecast to tumble 12.6 percent in May from a year earlier.

The declining pace of the country's exports became faster from 0.9 percent in January to 3.3 percent in February, 4.3 percent in March and 8.1 percent in April.

Caused by the faster export decline, production in all industries reduced 0.3 percent in April from a month earlier after sliding 0.5 percent in March.

The South Korean currency kept appreciating to the Japanese yen, weakening price competitiveness of domestic exporters. The BOK's additional rate cut would put downward pressures on the South Korean currency to the yen.

Daeshin Securities also expected the BOK to lower the policy rate to a new record low of 1.5 percent in June after cutting it by 25 basis points in March this year, and in August and October last year respectively.

The local brokerage said in a report that the BOK's monetary policy response would be needed without a doubt if South Korea takes the initiative to lead the currency war with Japan.

The report said that the South Korean government wanted to respond to the weak Japanese yen trend to boost the country's sluggish exports. Endi