Seoul: The South Korean won continued its downward trajectory against the U.S. dollar on Monday, reaching a new seven-month low and edging closer to its weakest level in 16 years. This decline is primarily attributed to the persistent selling of stocks by foreign investors.
According to Yonhap News Agency, the won was quoted at 1,477.1 per dollar at 3:30 p.m., marking a 1.5 won decrease from the previous session. This is the weakest level the currency has seen since April 9, when it ended at 1,484.1 won, the lowest point of the year. The last time the won reached such lows was on March 12, 2009, when it closed at 1,496.5 per dollar during the global financial crisis.
Earlier this month, the local currency slipped below the psychologically significant 1,450-won threshold for the first time since April and has remained under pressure despite verbal intervention by authorities. Park Ji-hoon, an economist at Hana Bank, noted that the won's weakness is driven by a strong U.S. dollar fueled by risk-off sentiment and increased dollar-buying by local investors.
Offshore investors have been net sellers of South Korean stocks following recent sharp gains amid fears of an artificial intelligence (AI) bubble. Meanwhile, local investors have increased their purchases of U.S. equities. Consequently, the benchmark Korea Composite Stock Price Index (KOSPI) fell 0.19 percent to close at 3,846.07 on Monday, affected by selling from both offshore and retail investors.
In light of the unstable foreign exchange market, authorities convened for closed-door consultations earlier in the day. Officials reported that during the meeting, representatives from the finance ministry, the Bank of Korea (BOK), the National Pension Service (NPS), and the welfare ministry explored measures to stabilize the currency. Discussions included potential intervention through the NPS and other major market participants.
The NPS's extensive overseas investments have significantly influenced supply and demand in the foreign exchange market. Some analysts speculate that the fund might adopt a more proactive approach to currency hedging to counteract the current market volatility.