The South Korean won (KRW) has fallen to its weakest level against the US dollar since the 2008 financial crisis. According to Bull Theory, the KRW/USD rate has dropped 7.5% in the past two months alone.
Global investors are pulling capital out of Korean markets amid growing concerns over AI valuations and the growth prospects of the chip sector, experts say.
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Why Is the Won Falling?
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.
The trend is also visible over the longer term. 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.
Pressure From the Stock Market
The currency weakness is unfolding amid a series of sharp declines in the Korean stock market. Earlier, on June 23, BeInCrypto reported that 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%.
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.
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.
The future trajectory will depend on the stability of demand for AI chips, which has fueled the Korean market’s growth. As long as foreign capital outflows persist, downward pressure on the won is likely to remain.
