"Only factors of won weakness abound"… Exchange rate breaks through 1450 won

Source

Korea Economic Daily

Summary

"The won-dollar exchange rate" surpassed 1450 won for the first time in 7 months, reporting a deepening of won weakness.
Due to foreign investors' exit from the market and a structural increase in overseas investment, Kospi fell by 1.8%%.
Experts raised the possibility of entering the 1480 won range and expressed concerns about further won weakness.

1456.9 won… Highest in 7 months

Foreign investors' market exit amid weak U.S. employment

Structural causes such as increased overseas investment

Kospi down 1.8%… Closes at 3953

< The currency exchange booth 'jumps' to 1460 won > The won-dollar exchange rate (as of 3:30 PM) closed the week at 1456 won 90 jeon, up 9 won 20 jeon in the Seoul foreign exchange market on the 7th. It surpassed 1450 won for the first time in about seven months. A digital board in front of a currency exchange in Myeong-dong displays major currencies' exchange rates against the won, such as the dollar and the yen, as of that day. / Reporter Kim Beom-jun

The won-dollar exchange rate surpassed 1450 won for the first time in seven months. Amid increased risk-aversion sentiment due to weak U.S. employment, foreign investors have been leaving the domestic stock market for the fifth consecutive day, fueling the won's weakness.

On the 7th in the Seoul foreign exchange market, the won-dollar exchange rate (as of 3:30 PM) closed the week at 1456 won 90 jeon, up 9 won 20 jeon from the previous day. The rate started the day at 1448 won 10 jeon, 40 jeon higher than the previous day, and widened its gains. At one point in the morning it also rose to 1458 won 50 jeon. That day's weekly closing level was the highest in seven months since April 9, when tensions between the U.S. and China intensified (1484 won 10 jeon).

U.S. outplacement firm Challenger, Gray & Christmas (C G & C) announced on the 6th (local time) that U.S. corporate layoffs last month totaled 153,074, the largest October figure since 2003. Concerns about a U.S. economic slowdown hit risk assets such as the won.

In the domestic stock market, foreign investors sold a net 479.1 billion won worth of securities on the KOSPI, and the KOSPI index closed down 72.69 points (1.81%) at 3953.76. Foreign investors have been on a selling streak for five days since the 3rd.

Foreign investors, who had been scooping up domestic semiconductor stocks such as Samsung Electronics and SK Hynix, began taking profits from the 3rd and have continued selling for five days. There are concerns that this trend may continue for some time as volatility in global markets increases amid worries over an AI bubble.

Experts say there is no sharp measure to reverse the won's weakness for the time being. Structural factors weakening the won, such as increased overseas investment by Korean retail investors and domestic companies, continue, and the supply-demand burden from annual $20 billion investment in the U.S. overlaps, raising concerns that the 1400-won range could become the 'new normal.' Moon Da-woon, a researcher at Korea Investment & Securities, said, "There is a possibility of entering the 1480 won range in the short term."

The government says it has minimized the impact on the foreign exchange market by limiting cash investment in the U.S. to $20 billion annually, but among experts there are many views that the resilience of foreign exchange reserves could be undermined, which would inevitably have a negative effect on the won's value.

Moon Da-woon, a researcher at Korea Investment & Securities, said, "As a U.S. shutdown drags on and concerns over a strong dollar persist, the psychological resistance level of 1440 won has been breached, tilting market expectations toward won weakness," adding, "There is a possibility of entering the 1480 won range in the short term."

Kang Jin-gyu reporter josep@hankyung.com