South Korean stocks rallied 1.91 percent on Friday as European leaders reportedly decided to ease bailout rules for debt-ridden governments, analysts said. The local currency gathered ground against the U.S. dollar.

The Korea Composite Stock Price Index (KOSPI) climbed 34.83 points to finish at 1,854.01. Trading volume was moderate at 309.8 million shares worth 4.29 trillion won (US$3.73 billion) with gainers far outpacing losers 578 to 248.

"Extreme fears over the eurozone seem to have been lifted. Germany's move to ease the rules for Spanish debt has, at least for the time being, calmed investors," said Kim Chul-joong, an analyst at Korea Investment & Securities Co.

The key index went south in early trading, but news from Brussels bolstered investor sentiment to take risky bets.

However, uncertainties remain so long as Germany keeps holding back from a more aggressive approach to tackling the fiscal crisis in the region, Kim said, adding foreign investors may shift into buying mode next week.

Offshore investors unloaded shares worth a total of 1.49 trillion won in the past six straight sessions.

Most shares closed bullish, with construction and financial firms leading the rise. Top builder Hyundai Engineering & Construction spiked 5.52 percent to 65,000 won and No. 2 lender Shinhan Financial surged 4.20 percent to 39,700 won.

Large caps advanced, with tech giant Samsung Electronic jumping 2.83 percent to 1,201,000 won and leading refiner SK Innovation soaring 4.94 percent to 138,000 won.

Top carmaker Hyundai Motor, however, lost 0.64 percent to 232,500 won as its labor union kicked off a strike after failing to reach a wage agreement.

The local currency ended at 1,145.40 won against the greenback, up 8.8 won from Thursday's close, on the back of the KOSPI's rise and the progress in European efforts to find a way out of the debt crisis, dealers said. (Yonhap News)