South Korean Won Extends Losses on Capital Outflows

The South Korean won traded around 1,333 per dollar, recovering losses and approaching its strongest level since October 2024, as an easing semiconductor sell-off and renewed appetite for riskier assets lifted the currency. Foreign investors returned to net buying in South Korean equities, purchasing KRW 343.5 billion worth of shares after a prolonged tech-led rout, helping ease concerns over capital outflows. Additionally, Federal Reserve Chair Kevin Warsh's positive assessment of the US economy and AI-driven growth helped revive demand for riskier assets, while declines in US Treasury yields and the dollar offered further support to the won. However, Warsh gave no clear signal on a rate hike this month, while strong US data and inflation concerns reinforced bets on a December hike. Also, persistent AI valuation concerns, Chinese competition in memory chips, and elevated inflation risks remained potential headwinds for Korean markets.

The South Korean won traded around 1,343 per dollar, extending losses as foreign capital outflows and concerns over AI investments weighed on local markets. Foreign investors withdrew a net $19.97 billion from South Korean stocks and bonds in September, marking an eighth consecutive month of net outflows. The selling persisted into October, with foreign investors offloading KRW 3.6 trillion in local shares on Thursday amid heavy losses in Samsung Electronics and SK hynix, driven by concerns over AI valuations and Chinese competition in memory chips. Additionally, US producer prices rose 1.3% month-on-month in September, the largest increase since March 2022, while annual inflation accelerated to 6.3%, fueling concerns over persistent price pressures and potential Federal Reserve tightening. Meanwhile, a retreat in US Treasury yields and the dollar offered some external relief.

The South Korean won traded around 1,341 per dollar, extending losses as the global semiconductor sell-off intensified risk aversion and prompted investors to retreat from the region's technology-heavy markets. Concerns over elevated AI valuations, high borrowing costs and the financing needs of massive AI infrastructure investments triggered a prolonged decline in US chip stocks, spilling over into South Korean equities and weighing on the currency. Foreign investors sold around $1.8 billion in KOSPI shares on Thursday morning alone, taking October outflows above $10 billion and increasing demand for dollars as capital exited local markets. Additionally, hotter-than-expected US inflation, with annual CPI reaching 3.7% in September against a 3.6% forecast, reinforced concerns over further Federal Reserve tightening, adding to uncertainty across financial markets. However, a pullback in US Treasury yields and oil prices help limit the won’s losses.