Won weakens against US dollar as Japan abolishes negative interest rate

A bank employee organizes stacks of bundled Japanese yen at Hana Bank's forgery and alteration response center, Seoul, Tuesday. The Bank of Japan decided earlier in the day to raise the key rate to a range of zero to 0.1 percent from minus 0.1 percent, raising it for the first time in 17 years and ending a negative rate policy that lasted eight years. Yonhap

The Korean won slid against the U.S. dollar on Tuesday in tandem with the weakening Japanese yen, as the Japanese central bank scrapped its negative interest rate for the first time in 17 years.

The won declined 6.1 won to 1,339.8 per U.S. dollar from Monday's domestic close.

In a widely anticipated move, the Bank of Japan raised its short-term policy rate to between zero and 0.1 percent, from minus 0.1 percent.

However, the yen's value fell as the Japanese central bank hinted that it may keep its loosening monetary policy.

Some analysts said Japan's increase of its key rate is expected to have a limited impact on financial markets in Korea in the near term.

Kong Dong-rak, an analyst at Daishin Securities, said Japan's further policy changes "are expected to take place very gradually" and it is unlikely to have a significant impact on stocks and foreign exchange markets in Korea.

Kong expected Japan's monetary policy change to be "very moderate" because it was the first rate hike in 17 years. (Yonhap)