The South Korean won is trading around 1,347 per US dollar, extending its losses as a global semiconductor sell-off intensifies risk aversion and pressures technology-heavy Asian markets. Concerns over elevated artificial intelligence valuations, high borrowing costs and the financing requirements of large-scale AI infrastructure investments are weighing on investor sentiment, with South Korean equities experiencing significant foreign capital outflows.

Foreign investors sold approximately $1.8 billion in KOSPI shares during Thursday morning alone, pushing October outflows above $10 billion. The resulting demand for US dollars is adding pressure to the won, while hotter-than-expected US inflation is reinforcing concerns that the Federal Reserve may maintain a restrictive monetary stance for longer.

Although falling US Treasury yields and lower oil prices are helping limit the currency’s losses, the near-term outlook remains vulnerable to further technology-sector weakness, continued foreign selling and changes in US interest-rate expectations.

Market Snapshot

• USD/KRW: The won weakens towards 1,347 per dollar.
• Technology sector: A global semiconductor sell-off is increasing risk aversion across technology-heavy Asian markets.
• Foreign capital flows: Investors sell approximately $1.8 billion in KOSPI shares during Thursday morning, with October outflows exceeding $10 billion.
• US inflation: Annual CPI inflation reaches 3.7% in September, above the 3.6% forecast.
• Federal Reserve: Persistent inflation increases uncertainty over the timing of future monetary easing and the possibility of further tightening.
• External support: A pullback in US Treasury yields and oil prices helps contain additional pressure on the won.

USD/KRW Outlook: Technology Weakness and Capital Flight Pressure the Won

The won remains exposed to the combined effects of global technology-sector volatility and capital outflows from South Korean financial markets. As a major participant in the semiconductor industry, South Korea is particularly sensitive to changes in investor expectations surrounding chip demand, AI investment and technology-sector valuations.

Concerns that AI infrastructure spending may be difficult to sustain at current valuations have contributed to a broader retreat from semiconductor stocks. If the sell-off persists, foreign investors could continue reducing exposure to South Korean equities, generating additional demand for dollars as capital leaves local markets.

The scale of October’s reported outflows highlights the importance of investor positioning in the current exchange-rate environment. Sustained foreign selling could keep USD/KRW elevated even if domestic economic conditions remain relatively stable.

US monetary policy adds another layer of uncertainty. September inflation of 3.7%, above the expected 3.6%, has strengthened concerns that the Federal Reserve may be reluctant to ease policy quickly. A more restrictive US interest-rate outlook could support the dollar against the won by maintaining the relative attractiveness of US assets.

However, the recent pullback in Treasury yields provides some relief. If yields continue to decline, dollar strength could moderate, reducing one source of pressure on the Korean currency.

Bullish Scenario: Won Stabilises as Technology Sentiment Improves

The won could recover if the semiconductor sell-off begins to ease and investors regain confidence in the outlook for AI-related demand and infrastructure investment. Reduced volatility in global technology markets could encourage foreign investors to reconsider their exposure to South Korean equities, potentially reversing some of the recent capital outflows.

A sustained decline in US Treasury yields could also help the currency by reducing support for the dollar. Lower oil prices may provide additional relief by limiting external cost pressures for an energy-importing economy such as South Korea.

Under this scenario, improved risk appetite and moderating dollar demand could allow USD/KRW to retreat from current levels. A more durable recovery, however, would likely require evidence that foreign selling is slowing rather than merely pausing.

Bearish Scenario: Continued Outflows Drive USD/KRW Higher

The won could face further depreciation if the global semiconductor sell-off intensifies and foreign investors continue withdrawing capital from South Korean equities. Renewed concerns over AI valuations, borrowing costs and the returns on large infrastructure investments could prolong the pressure on technology-heavy markets.

A stronger US dollar would add to these risks. If inflation remains persistent and markets anticipate a more restrictive Federal Reserve, US yields could regain momentum, encouraging further dollar demand.

In this environment, continued equity outflows and a stronger dollar could push USD/KRW higher. The combination of deteriorating risk sentiment and sustained capital flight would leave the won vulnerable even if lower oil prices provide some offsetting support.

USD/KRW Forecast: Downside Risks Remain Elevated for the Won

The near-term outlook for the South Korean won remains cautious to bearish while technology-sector volatility and foreign capital outflows continue to dominate market sentiment.

The area around 1,347 per dollar provides the current reference point for assessing the currency’s next move. A stabilisation in semiconductor stocks, reduced foreign selling and softer US Treasury yields could help the won recover. Conversely, accelerating outflows, renewed pressure on US technology stocks or a more hawkish Federal Reserve outlook could place further upward pressure on USD/KRW.

The key factor to monitor is whether the current capital outflow reflects a temporary reassessment of technology valuations or a more persistent reduction in foreign exposure to South Korean assets. Until that distinction becomes clearer, the won is likely to remain sensitive to global risk appetite and movements in the US dollar.

Market Outlook: What to Watch Next

Global semiconductor performance: Further losses in US chip stocks could reinforce risk aversion and increase pressure on South Korean equities and the won.

Foreign investor flows: The pace of KOSPI selling will be an important indicator of whether capital outflows are stabilising or accelerating.

US inflation and Federal Reserve policy: Additional inflation data and central-bank communications will shape expectations for interest rates and the dollar.

US Treasury yields: A sustained decline in yields could limit dollar strength and offer the won some relief.

Oil prices: Lower oil prices may help contain import costs, while a renewed rise could add to pressure on South Korea’s external balance.

AI investment outlook: Changes in expectations for semiconductor demand, AI infrastructure spending and investment returns could influence sentiment towards South Korean technology companies.

Currency Hedger View

Currency Hedger views the won as vulnerable to continued volatility while global technology markets remain under pressure and foreign investors reassess their exposure to South Korean equities. Capital outflows and persistent US inflation are creating a challenging combination for the currency, although lower Treasury yields and oil prices may provide some support.

Businesses with Korean won and US dollar exposure should monitor exchange-rate movements alongside developments in semiconductor markets, foreign investment flows and Federal Reserve policy. Companies with upcoming supplier payments or revenue in Korean won may benefit from assessing alternative exchange-rate scenarios and reviewing how currency movements could affect operating margins and cash-flow planning.

Currency Hedger monitors foreign exchange markets alongside broader commodity and macroeconomic conditions, helping businesses assess and manage their international currency exposure.

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Analysis: Louis Roche, Today Markets

Disclaimer: This analysis is for informational and educational purposes only and does not constitute investment, financial or trading advice. Foreign exchange markets are subject to significant risk, and forecasts are conditional scenarios rather than guarantees of future performance. Businesses should assess their individual circumstances and risk exposure before making financial decisions.