Korean stocks closed lower Friday as poorer-than-anticipated economic data from the United States and a possible U.S. rate hike down the road continued to weigh on local investors. The local currency lost ground against the U.S. dollar for a third consecutive session.

The benchmark Korea Composite Stock Price Index (KOSPI) retreated 2.16 points, or 0.11 percent, to close at 1,983.81. Trade volume was moderate at 457.3 million shares, with losers beating winners 425 to 370.

Local shares opened a tad higher following overnight gains on Wall Street but pared earlier advances as investors took to the sidelines ahead of a possible U.S. rate hike in April.

Reports of a possible slowdown in the U.S. manufacturing sector further weighed on investor sentiments. According to the earlier reports, U.S. orders for durable goods shrank 2.8 percent on-month in February, indicating a possible slump in U.S. exports and its manufacturing output.

"The market continues to react to the recent remarks from U.S. Federal Reserve officials, hinting at a possible rate hike next month, but will soon be stabilized," Bookook Securities analyst Kim Sung-hwan said.

The analyst also claimed such remarks may have rather been intended to counter growing market expectations for a delay in a U.S. rate hike, leading to a weakening of the U.S. dollar against its global peers.

"I do not expect the dollar to strengthen indefinitely, which is why the current condition cannot be said to be alarming," he said.

Foreigners offloaded a net 42.4 billion won ($36.3 million), ending their buying streak of 11 consecutive sessions. Retail investors dumped a net 71.4 billion won, while institutional investors scooped up a net 41.8 billion won.

Most large caps closed mixed.

Market bellwether Samsung Electronics added 0.47 percent to 1,288,000 won, while Samsung SDS, a key IT unit of Samsung Group, plunged 7.26 percent to 172,500 won.

Top automaker Hyundai Motor lost 1.61 percent to 153,000 won, with its smaller affiliate Kia Motors shedding 0.50 percent to 49,300 won.

Global steelmaker POSCO advanced 0.24 percent to 209,500 won, but chipmaker SK hynix slipped 1.02 percent to 29,150 won.

The local currency closed at 1,169.20 won against the U.S. greenback, down 2.90 won from Thursday's close.

Bond prices, which move inversely to yields, closed higher. The yields on three-year Treasury notes fell 0.5 basis point to 1.495 percent and the return on the benchmark five-year government bond slipped 0.8 basis point to 1.600 percent. (Yonhap)