MUFG’s Hardman links a sharp correction in South Korean AI‑heavy equities to potential pressure on the Korean Won. USD/KRW hit a fresh high above 1,560 after strong US jobs data, but then fell about 1.5% as authorities unveiled emergency FX measures, including tighter oversight of offshore derivatives and enhanced scrutiny of suspected misconduct and illegal transactions.

Equity selloff and emergency FX response

"The sharp correction lower for South Korea’s equity market which is dominated by the AI tech stocks of Samsung Electronics and SK Hynic Inc, could add to selling pressure for the Korean won. Foreign investors have already been heavy sellers of Korean equities so far this year."

"USD/KRW hit a fresh high of 1,562.3 on Friday after the stronger NFP report but has since dropped by around -1.5% overnight in response to emergency measures announced by domestic policymakers to provide more support for the won."

"South Korea announced a response plan including tighter oversight of offshore currency derivatives, inspections targeting suspected market misconduct, and probes into potentially illegal foreign exchange transactions after an emergency meeting with the heads of the Bank of Korea and financial regulators."

"The latest measures build on earlier steps including allowing the National Pension Service to expand FX hedging and easing rules to improve dollar liquidity."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)