South Korea's central bank today announced to cut its key interest rate from 5 percent to 4.25 percent to ease financial strains facing local banks and companies.

The decision was made after the Bank of Korea (BOK) Gov. Lee Seong-tae presided a policy meeting.

It was the second reduction on the benchmark 7-day repurchase agreement rate during a month. On Oct. 9, the central bank announced to cut the key interest rate from 5.25 percent to 5 percent.

South Korea's benchmark stock index KOSPI on Friday plunged by 10.57 percent to 938.75 points, falling below the 1000-point mark for the first time since June 2005. The local currency closed on Friday at a 10-year low of 1,422 won against one US dollar.