Korean shares hit a yearly high on Thursday, buoyed by increased demand for risky assets following the Federal Reserve's decision to freeze rates, with the local currency also climbing to this year's highest level against the U.S. dollar.

After hitting an intraday high of 2,000.30 in late morning trade, the benchmark Korea Composite Stock Price Index finished 13.09 points, or 0.66 percent, higher at 1,987.99. 


The Korean currency closed at 1,173.30 against the greenback, up 20.00 won, or 1.68 percent, from Wednesday's close.

After a two-day policy meeting, the Fed implied two interest rate hikes this year instead of four previously anticipated, fueling bets on risky assets such as shares and currencies in emerging markets in the short term.

"Rising oil prices and the dollar's weakness against major currencies will also encourage offshore investors to purchase more Korean stocks," Shinyoung Securities analyst Jeong Dong-hyu said.

The dollar fell after the Fed picked slower global growth and turmoil in world financial markets as threats to the U.S. economy. 

Foreigners were net buyers for a sixth straight session Thursday, purchasing a massive 423.26 billion won ($360 million) worth of local stocks. Individuals and institutions sold a net 442.75 billion won limiting the KOSPI's further gains.

Trading volume was moderate at 282.237 million shares worth 4.67 trillion won, with advancers outnumbering decliners 487 to 293.

Most large caps climbed across the board, with techs, petrochemicals, automobiles and steel shares leading gains.

Among top performers, bellwether Samsung Electronics advanced 0.56 percent to 1,263,000 won, top refiner SK Innovation jumped 4.18 percent to 162,000 won. No. 1 steelmaker POSCO surged 4.43 percent to 212,000 won.

Bond prices, which move inversely to yields, closed higher. The yields on three-year Treasury notes fell 2.7 basis points to 1.515 percent and the return on the benchmark five-year government bond slipped 4.4 basis points to 1.624 percent. (Yonhap)