The net selling of domestic stocks by foreign investors in July totaled $20.7 billion, the Bank of Korea said on the 13th. Compared with the record-high June figure of $32.37 billion, selling narrowed. As the domestic KOSPI index fell, foreigners' rebalancing-driven selling eased, but with conflict in the Middle East continuing, foreign securities investment funds have continued to flow out.
Foreign investors also dumped domestic bonds. According to the "International finance and foreign exchange market trends since July" released by the Bank of Korea the same day, foreigners' net selling of bonds was $960 million. After recording consecutive net purchases of $550 million in April, $5.68 billion in May, and $1.65 billion in June, they turned to selling. Even though Korea Treasury Bonds were included in the World Government Bond Index (WGBI), there was a net outflow.
The exchange rate, which was in the 1,550 won range in early July, quickly fell to the 1,450 won range within a month. As a result, the average daily exchange-rate fluctuation in July was 8%, wider than the previous month's 7.6%. The decline has continued this month, reaching the 1,410 won range. The Bank of Korea said, "With expectations for U.S. Federal Reserve (Fed) rate hikes weakening, the U.S. dollar showed weakness," adding, "Improved supply and demand conditions in the domestic foreign exchange market also had an effect."
The Japanese yen strengthened on U.S.-Japan coordination. By contrast, the Taiwan dollar weakened. As semiconductor exports buoyed stock prices, foreign investors sold Taiwanese stocks to take profits. In such cases, demand for U.S. dollars in Taiwan's foreign exchange market exceeds that for the local currency, pushing the exchange rate higher.