Foreigners Sell Stocks, Yet the Exchange Rate Falls? Exporters’ Dollar Sales Play a Role

As South Korea’s stock market continues to swing sharply, the won has remained strong. Unlike the usual pattern in which foreign investors’ stock sales lead to a rise in the exchange rate, dollar sales by exporters appear to be supporting the won.
According to the financial investment industry on the 21st, the won-dollar exchange rate closed daytime trading in Seoul at 1,325.2 won, down 2.9 won from the previous trading day. After hitting 1,328.1 won the previous day, its lowest level since October 2, 2024, it set a new low just one day later.
Dollar sales by exporters are cited as a reason the exchange rate is falling despite the KOSPI’s weakness, with the index down more than 20% this month alone. A source at a securities firm explained, “Usually, when foreign investors sell domestic stocks, convert the proceeds from won to dollars and take them out of the country, the exchange rate rises. Recently, however, exporters such as semiconductor companies have been putting the dollars they earn on the market, pushing the rate down.” Another factor behind the decline is that companies which had stockpiled dollars while waiting for the exchange rate to rise further have begun selling them.
If the won’s strength continues, companies with substantial dollar-denominated expenses could face less of a burden. Airlines would see a reduction in foreign-currency costs related to jet fuel and aircraft, as well as in the won-conversion burden of their foreign-currency debt. Food and beverage companies may also see lower purchase costs in won for imported raw materials such as grains. Conversely, a lower exchange rate could weigh on exporters’ earnings. Hyundai Rotem’s operating profit in the third quarter of this year was 247.1 billion won, down 11% from the same period last year. The decline in the exchange rate and delays in securing orders for K2 tanks were cited as contributing factors.
Even so, the exchange rate could still rebound. Demand for dollars could grow if debt problems at artificial intelligence (AI) companies spread and foreign investors increase their selling of domestic stocks.
[email protected] Choi Doo-sun Reporter