South Korean stocks closed 0.39 percent higher Friday, extending the rally for a second day as the U.S. Federal Reserve's plan to reduce stimulus subdued prolonged market uncertainties, analysts said. The local currency edged down against the U.S. dollar. 

The benchmark Korea Composite Stock Price Index (KOSPI) advanced 7.70 points to finish at 1,973.12. Trading volume was light at 237.4 million shares worth 3.11 trillion won ($2.92 billion) with gainers outpacing decliners 430 to 357.

Analysts said investors chose to enjoy the eased jitters following the Fed's tapering announcement instead of being weighed down by a falling yen.

"The reason behind (the decision to) taper is that the economy is on track for recovery. That is enough to attract investors to make more risky bets, along with the fact that now the policy uncertainties have been quelled," said Park Jung-woo, an analyst at Samsung Securities Co.

The main index began sharply higher on Thursday on the back of the tapering news but soon pared the gains, unnerved by renewed fear of the yen's descent triggered by a stronger greenback.

A firm net purchase of local equities by institutions drove up the KOSPI with 154.8 billion won. Foreigners also extended their buying binge from the previous session and scooped up a net 34.4 billion won. But retail investors unloaded a net 181.9 billion won.

Defensive shares and auto issues gathered ground. State-run electricity provider Korea Electric Power Corp. shot up 2.13 percent to 33,550 won.

Hyundai Motor and its affiliate Kia Motors, the two major carmakers here, both rose 1.81 percent to 224,500 won and 2,24 percent to 54,700 won, respectively, as they shrugged off the yen risk.

The local currency ended at 1,061.20 won against the greenback, down 1.1 won from Thursday's close, mainly due to a rising dollar, dealers said. (Yonhap News)