Foreigners exit, exchange rate soars to 1450 won… highest in 7 months

The won·dollar exchange rate spiked to 1450 won intraday on the 5th. It was the highest level in 7 months. The rise is interpreted as the won coming under downward pressure after foreign investors sold large volumes of domestic stocks.

On the day in the Seoul foreign exchange market, the won·dollar exchange rate closed weekly trading at 1449.4 won. The weekly closing price was the highest since April 11 (1449.9 won), marking the highest close in 7 months.

The exchange rate opened at 1443.5 won, up 5.6 won from the previous session. It then trended upward and hit 1450 won at around 3:28 p.m. Intraday reaching 1450 won was the first time since April 11 (intraday high 1457.2 won).

Foreigners heavily sold domestic stocks, putting upward pressure on the exchange rate. On the day, in the Korea Exchange-listed market (based on Korea Exchange), foreigners net sold spot stocks worth 2.5182 trillion won. In the KOSDAQ market, they also showed a selling bias of 597.4 billion won.

It is interpreted that the domestic market was also affected as a controversy over an AI (artificial intelligence) bubble flared in the U.S. stock market and related stocks plunged. Michael Burry, the model from 'The Big Short,' mentioned that he had built short (sell) positions in Nvidia and Palantir, which heightened concerns about overheating.

Reduced expectations for a U.S. rate cut also supported dollar strength. Jerome Powell, chair of the U.S. Federal Reserve (Fed), drew a line on the 29th saying, "An additional rate cut in December is by no means certain." In fact, at this Federal Open Market Committee (FOMC) meeting, 2 of the 12 voting members argued for keeping rates unchanged. The dollar index also recently broke above 100. The dollar index indicates the value of the dollar against the currencies of six major countries.

Kwon A-min, an analyst at NH Investment & Securities, said, "Since economic data releases have been suspended due to a U.S. federal government shutdown, caution regarding a December rate cut is spreading," but diagnosed, "However, it is difficult to view this as a harbinger of a strong-dollar trend."

He added, "In the case of the won·dollar exchange rate, it is at a level that warrants caution about intervention by authorities. I assess that there is not much room for further upside from the current level."

Jin Young-gi Hankyung.com reporter young71@hankyung.com