South Korea will closely monitor the financial market as market volatility could increase from a spike in virus cases and talks of an early tapering of the Federal Reserve's bond purchase, a senior government official said Thursday.

After a two-day policy meeting, the Fed on Wednesday kept its key interest rate near zero and left unchanged its bond-buying program. The Fed said the US economy is on a solid recovery track despite a flare-up in COVID-19 cases, but it did not provide a timetable for tapering of its asset purchases.

First Vice Finance Minister Lee Eog-weon said the outcome of the Fed meeting is expected to have limited impacts on the Korean financial market as the result was widely in line with market expectations.

"But amid lingering economic uncertainty from the spread of the more contagious COVID-19 delta variant and trade tension between the US and China, concerns about the Fed's early tapering issue persist," Lee said at a meeting on macroeconomics.

"We need to continue to be vigilant about the possibility that market volatility could increase at any time," he added.

The benchmark KOSPI gained ground in early trading, tracking overnight gains in US markets over the Fed meeting.

The key stock index was trading at 11.40 points, or 0.35 percent higher, at 3,248.26 as of 9:45 a.m. The Korean currency was trading at 1,150.80 per the US dollar, up 3.8 won from the previous day. (Yonhap)