South Korean shares closed higher on Friday, tracking regional gains as investors' hopes for a US Federal Reserve decision to cut interest rates were boosted by cooling US inflation data.

The Korea Composite Stock Price Index or Kospi rose by 26.04 points, or 0.7%, to end at 4,020.55. The Kosdaq also rose by 13.94 points, or 1.6%, to close at 915.27.

In economic news, the South Korea Producer Price Index rose 1.9% year over year in November, faster than the 1.6% yearly growth in the prior month, according to Bank of Korea data released early Friday morning.

The increase was mainly driven by the Agricultural, Forestry & Marine Products sub-index, which increased 5.5% year on year, followed by the 2.2% climb in the Services sub-index.

On the corporate front, shares of Ilsung Construction (KRX:013360) were down over 3% at the close as it received a construction order totaling 57.5 won by the Korea Land and Housing Corp.

The project entails the construction of seven apartment buildings on a land area of 27,561 square meters.