Weak won cools Korean buying of US stocks

Net purchases plunge over 77% as currency conversion costs rise

A screen at a currency exchange counter at Incheon Airport shows the won’s exchange rate against major currencies on Tuesday. (Yonhap)

A rapidly weakening won is weighing on Korean demand for US equities, forcing investors to rein in overseas buying.

Net purchases of US stocks by domestic investors fell to $228.28 million between Dec. 6 and Friday, down more than 77 percent from the previous week, Korea Securities Depository data showed Tuesday.

While domestic investors remain net buyers of US stocks, the scale of purchases has shrunk sharply, largely due to the won’s recent depreciation, which has driven up currency conversion costs.

During the period, the won has weakened from 1,468.8 to 1,473.7 per dollar, losing value by roughly 5 won, based on daytime trading closing prices. On Friday, the won even touched 1,479.9 per dollar during overnight trading, nearing the 1,480 mark before ending the session at 1,477 per dollar.

Amid the won’s weakness, the Bank of Korea and the National Pension Service agreed Monday to extend their $65 billion foreign exchange swap line through the end of 2026.

The arrangement allows the pension fund to borrow dollars from the central bank’s foreign exchange reserves to finance overseas investments, easing selling pressure on the won and reducing the demand for dollars.

On the same day, the NPS Management Committee decided to maintain the fund’s current cap on its forex hedging ratio throughout 2026. The measure involves the pension fund selling forward contracts at a prefixed exchange rate for up to 10 percent of its overseas assets, providing more dollar supply on the market.

Despite efforts to ease dollar demand pressures and strengthen the won, the local currency is struggling against the greenback. The won was quoted at 1,474.8 per dollar as of 1:30 p.m. Tuesday, slightly weaker than the previous day's daytime trading closing at 1,471.

The won kicked off daytime trading at 1,468 per dollar earlier in the day, posting a modest gain from the previous session. However, it soon reversed course and returned to the 1,470 per dollar range in the following hours.

“The won continues to post outsized losses against the dollar despite foreign investors’ net buying of local stocks, as concerns over further depreciation of the won have not been fully dispelled,” said Park Sang-hyun, an analyst at iM Securities.