Following a prolonged decline in South Korea’s stock market, the won fell to its lowest level against the U.S. dollar since the 2008 financial crisis. Market participants attribute the recent pressure on the exchange rate to foreign investors withdrawing from Korean equities and repatriating funds into dollar-denominated assets, with concerns over AI valuations and cooling expectations for semiconductor industry growth further amplifying the sell-off.
Two-month decline widens
Coinpaper, citing Bull Theory data, reports that the Korean won has depreciated 7.5% against the U.S. dollar over the past two months. The KRW/USD exchange rate briefly fell to 0.000632, nearing levels seen during the 2008 crisis peak, and is currently hovering around 0.000638.
After foreign investors sell South Korean stocks, they typically convert the proceeds back into U.S. dollars or their home currency, directly increasing demand for the dollar and putting downward pressure on the Korean won. Since the won is not a major reserve currency, exchange rate fluctuations tend to be more pronounced when there is concentrated outflow of overseas capital.
The Korean stock market has triggered trading halts consecutively.
As the Korean won weakened, the Korean stock market also plunged sharply. The report noted that on June 23, the KOSPI composite stock price index fell 9.99% in a single day, triggering a trading halt, with SK Hynix and Samsung Electronics both dropping more than 11%.
The selling pressure continued to escalate. On June 26, the KOSPI fell more than 8%, marking the fifth circuit breaker trigger within a month. According to reported figures, the market capitalization of South Korea’s stock market declined by over 400 trillion Korean won, equivalent to approximately $360 billion.
- June 23: KOSPI fell 9.99%
- June 26: KOSPI falls another 8%
- Within a single month: the market was suspended five times.
AI chip demand outlook weakening becomes focal point
The report linked this round of volatility to a correction in AI sector valuations. Over the past period, Korea’s market rally had largely depended on expectations of AI chip demand, particularly in memory chips and large tech stocks. As investors begin to reassess these valuations, capital outflows have accelerated.
Another source of pressure mentioned comes from margin trading. Reports indicate that South Korea’s margin trading balance has risen to KRW 32.67 trillion, approximately $22.4 billion, a 25% year-over-year increase. During rapid stock price declines, highly leveraged positions can amplify selling pressure, further dragging down the stock market and exchange rate.
The article shows that the won's future movement still depends on whether demand for AI chips can stabilize. If foreign capital continues to flow out of the Korean market, the downward pressure on the won may be difficult to alleviate quickly.