The USD/KRW exchange rate has been quite interesting over the past two weeks. It has depreciated for nine consecutive trading days, falling to around 1473 KRW per 1 USD, the longest streak of decline since the 2008 financial crisis. It sounds a bit alarming.

The main reason is actually not complicated—domestic investors in South Korea are withdrawing their investments abroad. One after another, they are moving their money into overseas assets, causing sustained capital outflow pressure. As a result, the sell-off of the Korean won naturally increases.

Since the beginning of the year, the KRW has depreciated by over 2%. For an economy that relies heavily on exports, this kind of depreciation has both advantages and disadvantages. The upside is that export prices become more competitive; the downside is that import costs rise, which could lead to inflationary pressures. For market participants, such macro liquidity changes are worth paying close attention to.