On the 5th, the won-dollar exchange rate closed at 1,539.1 won per U.S. dollar, up 9.4 won. The closing price approached the level on March 9, 2009 (1,549 won) during the global financial crisis. It also topped 1,500 won for 14 straight days. The move was largely driven by foreigners' net selling of stocks worth 3.5 trillion won in the Korea Exchange on the day after a one-day pause.
◇ Foreigners' net stock selling outweighs current account surplus
In the Seoul foreign exchange market that day, the won-dollar exchange rate opened at 1,529 won, down 0.7 won. It turned higher right after the open and surged to 1,549.1 won at 10:27 a.m. Intraday, it was the highest since March 10, 2009 (1,561 won). Although the pace of gains narrowed somewhat afterward, it closed near 1,540 won.
Since the 15th of last month, the exchange rate has closed in the 1,500-won range for 14 straight days. It has already surpassed the record (11 days) during the 2009 global financial crisis and is the longest stretch in the 1,500s since the foreign exchange crisis (49 days).
Thanks to a semiconductor boom, economic indicators such as exports have been strong. The Bank of Korea released in the morning that the April current account posted a $28.29 billion surplus, the second largest on record after March.
However, as foreigners dumped stocks by the trillion-won, the Korea Composite Stock Price Index (KOSPI) closed at 8,160.59, down 5.54% from the previous day, and the exchange rate was pushed higher. They were net sellers for 20 consecutive trading days. Cumulative net selling over the period reached 70 trillion won.
◇ Concerns over AI overinvestment amid Middle East war
Recent net selling of Korean stocks by foreigners is seen as being driven by a combination of growing risk-off sentiment due to the Middle East war and profit-taking in artificial intelligence (AI) related shares. After Broadcom released revenue for February–April that fell short of expectations the previous day, concerns about AI overinvestment spread.
Park Sang-hyun, an analyst at iM Securities, said, "If a cease-fire deal related to the Middle East war is reached next week, a drop in international oil prices could become a factor for a lower exchange rate, but if not, the rate could rise further."
Verbal intervention by the government has also failed to slow the pace of the exchange rate's rise. Deputy Prime Minister and Minister of the Ministry of Economy and Finance Koo Yun-cheol said at a market monitoring meeting the previous day that "we will take necessary measures immediately against excessive one-sidedness." He added at a joint meeting of the Emergency Economic Headquarters and the Ministers for Economic Affairs on the day that "volatility in the financial and foreign exchange markets has recently been increasing" and that "we are responding with heightened vigilance."