The South Korean won (KRW) has fallen to its weakest level against the US dollar since the 2008 financial crisis. The KRW/USD rate dropped 7.5% in the past two months, according to Bull Theory. Foreign investors are pulling capital from Korean markets amid growing concerns over AI valuations and the growth prospects of the chip sector. When foreign investors sell Korean stocks, they convert the proceeds back into their own currencies, directly pressuring the exchange rate. The KRW/USD rate fell to 0.000632, its lowest level since 2009, and is currently hovering around 0.000638, a level last seen during the height of the 2008 crisis. The currency weakness unfolds as the Korean stock market has experienced a series of sharp declines, with more than 400 trillion won (about $360 billion) wiped from the market.
Foreign Stock Sales Drive Currency to 2009 Low
The mechanism behind the currency pressure is straightforward. When foreign investors sell Korean stocks, they convert the proceeds back into their own currencies. This selling pressure is then directly reflected in the exchange rate. According to the KRW/USD chart, the exchange rate fell to 0.000632, its lowest level since 2009, and is currently hovering around 0.000638. The previous comparable level was seen only during the height of the 2008 crisis.
KOSPI Index Plunges on June 23 and June 26
The currency weakness is unfolding amid a series of sharp declines in the Korean stock market. On June 23, BeInCrypto reported that the KOSPI index fell 9.99% in one day, triggering a trading halt. Shares of SK Hynix and Samsung Electronics lost more than 11%. The selloff then continued and intensified. On June 26, the index plunged again by more than 8%, marking the fifth trading halt in a month. More than 400 trillion won, or about $360 billion, was wiped from the market.
Non-Reserve Status and Margin Debt Amplify Pressure
One of the key factors putting pressure on the KRW is the currency's status. It is considered a non-reserve currency and is not widely held in global reserves, meaning foreign selling can have a stronger impact. An additional blow came from record margin debt, which reached 32.67 trillion won, or about $22.4 billion, up 25% year-on-year.
FAQ
Why did the South Korean won fall to its lowest level since 2008?
The South Korean won fell to its weakest level against the US dollar since the 2008 financial crisis due to foreign investors pulling capital from Korean markets amid concerns over AI valuations and chip sector growth prospects. When foreign investors sell Korean stocks, they convert the proceeds back into their own currencies, directly pressuring the exchange rate.
What happened to the KOSPI index on June 23 and June 26?
On June 23, the KOSPI index fell 9.99% in one day, triggering a trading halt, while shares of SK Hynix and Samsung Electronics lost more than 11%. On June 26, the index plunged again by more than 8%, marking the fifth trading halt in a month. More than 400 trillion won, or about $360 billion, was wiped from the market.
What factors amplify pressure on the Korean won?
The Korean won is considered a non-reserve currency and is not widely held in global reserves, meaning foreign selling can have a stronger impact. Record margin debt reached 32.67 trillion won, or about $22.4 billion, up 25% year-on-year, adding additional pressure to the currency.
