South Korea's benchmark KOSPI index closed virtually unchanged at 6,715.41 points, marking a slight decline of 2.56 points for the session.

The market experienced a notable reversal after opening with gains, as foreign investors executed substantial net selling that pushed the index down as much as 0.9% during intraday trading before recovering to finish near the flatline.

Following the Federal Reserve's policy decision, South Korea's financial authorities convened a meeting attended by Economy and Finance Minister Koo Yun-Cheol, Bank of Korea Governor Shin Hyun-Song, and heads of various financial regulatory bodies. According to a statement from the Ministry of Economy and Finance, regulators concluded that the Fed's rate hike would have limited impact on domestic markets, as investors had largely priced in the expectation, leaving the overall financial environment stable.

Officials noted that volatility in the government bond market has increased, and they stand ready to implement necessary stabilization measures should excessive market fluctuations occur. Authorities also pledged to closely monitor oil prices and global capital flows, while jointly assessing their effects on domestic financial and foreign exchange markets.

Amid the Fed's hawkish stance and cooling risk appetite, the Korean won slid for a fourth consecutive session. The dollar advanced 0.4% against the won to 1,381.65, following cumulative gains exceeding 2% over the previous three trading days. One-month implied volatility for the dollar-won pair stood at 10.0975%, edging up from Wednesday's 10.075%.

Ha Keon-hyeong, an economist at Shinhan Investment, commented that in the near term, the Fed's rate increase could widen the interest rate differential with South Korea and weigh on the won. However, he noted that since U.S. fundamentals are not stronger than Korea's, the won is unlikely to experience sustained depreciation.

Data released by the Bank of Korea on Thursday revealed that foreign investors made net purchases of Korean stocks worth $400 million in August, bringing an end to a seven-month selling streak. The central bank attributed the shift to improved sentiment driven by strong earnings reports from major U.S. technology companies, despite renewed tensions in the Middle East and lingering concerns over excessive investment in AI infrastructure.