The South Korean won gained ground against the U.S. dollar for a second straight session on Wednesday after China's rate cut helped lift appetites for risky assets.

The local currency was quoted at 1,186.85 to the greenback as of 1:30 p.m., up 8.45 won from the previous session's close.

On Tuesday, China slashed its key interest rate for the fifth time since November to buttress up the world's No. 2 economy, whose slowdown fear has triggered turbulence in the global financial market.

"The local currency authorities will try to stem the won's sharp decline, putting pressure on it not to break through the 1,200-won level," said Jun Seung-ji, an analyst at Samsung Futures Co.

The won has been under selling pressure over the past few weeks due to worries over China's economic slowdown, coupled with the ongoing tension on the peninsula, which has triggered massive capital outflows from emerging markets.

China's yuan devaluations have jolted the global financial market with bets on risky assets sharply tumbling amid concerns over a slowdown in the global economy.

On Monday, the two Koreas reached an agreement on defusing heightened tensions in a dramatic breakthrough after days of intensive high-level talks.

The won-yen arbitrated rate stood at 993.57 won per 100 yen as of 1:30 p.m., the lowest in nine months, as the local currency tumbled amid concerns over a slowdown in China and global economic uncertainties.

Following China's unexpected rate cut, South Korean stocks rose for a second straight session, rising 1.92 percent as of 1:30 p.m. (Yonhap)