Won Weakens to 1,342 Per Dollar as Foreign Investors Sell Korean Stocks
The won-dollar exchange rate closed at 1,342.1 won in Seoul's foreign exchange market on Nov. 5, up 0.6 won from the previous trading day. The move ran counter to the dollar's weakness after the U.S. midterm elections, with analysts attributing the rise to foreign investors selling off domestic stocks.
The upward pressure on the exchange rate came from an outflow of foreign capital. Concerns over a slowdown in the expansion of artificial intelligence (AI) data centers following the U.S. midterm elections weighed on Korean semiconductor stocks, and the resulting outflow of foreign funds put downward pressure on the won. Actual dollar buying from both inside and outside the market also contributed to the higher exchange rate.
The shifting U.S. political landscape is acting as a factor weakening the dollar. With the Democratic Party winning control of both chambers of Congress in the midterm elections, there is a possibility that the Trump administration's fiscal expansion and tariff policies could face obstacles. Some analysts suggest that if the likelihood of additional Treasury issuance tied to expanded fiscal spending diminishes and the growth of AI data center investment slows, upward pressure on U.S. long-term interest rates could ease. Expectations of lower U.S. interest rates are also growing as talk emerges of trade agreements, including tariff reductions.
Even as the dollar weakened, the won lost value alongside it. The dollar index (DXY), which measures the dollar against a basket of six major currencies, stood at 101.23 as of 3:37 p.m. on Nov. 5, down 0.34 percentage points from 101.57 the previous day. Continued dollar selling by Korean semiconductor companies limited the exchange rate's further rise, though the scale of such supply has eased somewhat since the beginning of the month.
Park Sang-hyun, a researcher at iM Securities, diagnosed that "with the Democratic Party taking control of both chambers of Congress in the U.S. midterm elections, political uncertainty has eased, and expectations of lower oil prices amid reduced Iran risks have added to the weakness in U.S. Treasury yields and the dollar." He added, "However, concerns over slowing data center investment spending have weighed on Korean semiconductor stocks, giving rise to factors constraining the won's strength, such as outflows of foreign capital."
