Foreign investors return to domestic stock market... Won-dollar exchange rate falls 7.2 won [Hankyung FX Market Watch]

The won-dollar exchange rate fell sharply (won value rose) due to concerns about an economic recession in the United States. The inflow of funds into the KOSPI as the U.S. stock market struggled also contributed to the exchange rate decline.

On the 12th, the won-dollar exchange rate (as of 3:30 PM) in the Seoul foreign exchange market closed weekly trading at 1,451 won, down 7.20 won from the previous day. The exchange rate opened at 1,453 won, down 5.20 won from the previous day, and fell as low as 1,448 won during the session.

Concerns about a U.S. recession and the resulting fluctuations in currency values across countries led the exchange rate movement today. In the morning, the Korean won linked to the appreciation of the Chinese yuan. The People's Bank of China set the yuan-dollar reference exchange rate at 7.1696 yuan per dollar, down 0.06% from the previous session. The won often serves as a proxy currency for the yuan, so the won value also rose in tandem. However, in the afternoon, as the dollar index rebounded in the Asian market, some of the decline was reversed.

After the Dow Jones Industrial Average fell 1.14%, the Standard & Poor's (S&P) 500 index fell 0.76%, and the Nasdaq index fell 0.18% in the U.S. New York stock market overnight, foreign funds partially flowing into the KOSPI also fueled the exchange rate decline. Foreign investors purchased 380 billion won worth of stocks today. They switched to net buying for the first time in three days. When foreign investors enter the domestic stock market, there is demand to convert dollars to won, which causes the exchange rate to fall.

Global uncertainty continues. Overnight, President Donald Trump announced that starting from the 12th, the U.S. would impose a 25% tariff on all imported steel, aluminum, and derivative products. While he drew the line saying he "doesn't think at all" about concerns of a U.S. economic recession, he responded to the stock market crash by saying, "The market will be good and bad, but we need to rebuild the country."

Expectations for an end to the Russia-Ukraine war have grown stronger. U.S. and Ukrainian delegations held high-level talks in Jeddah, Saudi Arabia, and agreed to pursue a '30-day ceasefire.'

As of 3:30 PM today, the won-yen cross rate was 979.91 won per 100 yen. This is down 9.94 won from the previous day's reference rate of 989.85 won at the same time. The yen-dollar exchange rate is 148.14 yen, up 0.24%.

Reporter Jinkyu Kang josep@hankyung.com