The won-dollar exchange rate has fallen to the 1430 won range, raising interest in the potential return of foreign investors to the domestic stock market.
As of 2:30 PM on August 3, the exchange rate stood at 1430.30 won in the Seoul foreign exchange market. While this is a slight increase from the previous closing price of 1424.00 won on July 31, it remains stable compared to the recent surge near 1500 won. Analysts generally expect the won-dollar exchange rate to fluctuate between 1416 and 1477 won in August.
The exchange rate directly impacts foreign investor returns. Foreign investors buy domestic stocks and then convert their funds back into dollars. If the value of the won declines during this process, even if stock prices rise, currency losses can diminish actual profits. Conversely, if the won strengthens or the exchange rate stabilizes, concerns about currency losses may ease, enhancing investment attractiveness.
For instance, if a foreign investor purchases 1 million won worth of domestic stocks and achieves a 10% profit, a significant drop in the value of the won during that period could result in losing part of that profit during the currency conversion. On the other hand, if stock prices rise alongside a stable exchange rate, investors can expect both stock gains and currency profits.
On July 31, the KOSPI closed at 6595.45, up 1001.89 points (17.91%) from the previous trading day, with foreign investors recording significant net purchases that contributed to the index's rise. Analysts noted that the rebound in the stock market and foreign buying pressure also increased the strength of the won.
However, it is difficult to predict continued foreign buying solely based on the exchange rate. Factors such as U.S. Federal Reserve monetary policy, U.S. Treasury yields, international oil prices, global risk appetite, and domestic corporate performance all play a role.
In particular, if international oil prices rise again or geopolitical tensions escalate, demand for safe-haven assets may increase, leading to a rise in the value of the dollar and a potential increase in the won-dollar exchange rate. Concerns have also been raised that if U.S. interest rates remain higher than expected, capital may flow out of emerging markets.
While analysts suggest that the exchange rate is likely to remain in the low to mid-1400 won range for the time being, they also caution that volatility will remain high. To assess whether foreign capital is returning in earnest, it is essential to monitor not only the exchange rate but also improvements in corporate performance and the sustainability of foreign net purchases.
* This article has been translated by AI.
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