The South Korean won fell to its weakest level in about two months, with the won-dollar rate closing at 1,493.0 won on Tuesday, down 10.4 won from the previous session. According to the Seoul foreign exchange market, the rate fell as low as 1,486.3 won during intraday trading, marking the lowest level since May 14. The currency decline was driven by exporter dollar selling and net buying of Korean stocks by foreign investors, creating a combination of supply and demand pressures on the exchange rate.
The currency weakness comes despite expectations of dollar inflows from SK Hynix Inc's American depositary receipts entering the local currency market. As reported by CNBC TV18, this represents a massive corporate milestone as South Korean memory chipmaker SK Hynix pulled off the largest public listing by a foreign company in US market history, raising $26.5 billion with its American depositary receipt offering. However, the 26.5 billion dollar (about 40 trillion won) ADR listing proceeds were paid in that day, creating expectations that dollar supply in the foreign exchange market would increase, contributing to the currency's decline.
The won's decline was compounded by dollar selling by exporters, following Hanwha Ocean's recent successive 2 billion dollar forward sales. According to market reports, foreign investors net bought about 950 billion won worth of shares on the stock market that day, easing dollar buying pressure and supporting won strength. This net buying by foreign investors helped offset some of the downward pressure from exporter dollar selling and the influx of ADR proceeds into the foreign exchange market.
Despite the currency weakness, Middle East geopolitical risk remains a factor supporting the exchange rate's floor. As reported by market experts, U.S. President Donald Trump has signaled additional military action against Iran, sustaining international oil prices and safe-haven preference sentiment. A foreign exchange market expert noted that "As Middle East instability and global dollar strength continue, the extent of any further decline in the exchange rate may be limited." This geopolitical backdrop continues to provide underlying support for the Korean won despite current market pressures.
