Korean shares closed 0.57 percent lower Wednesday as institutions went on a selling binge ahead of what many believed an imminent U.S. rate hike. The local currency lost ground against the U.S. dollar.

The benchmark Korea Composite Stock Price Index (KOSPI) lost 11.33 points to close at 1,956.73. Trading volume came to 688.6 million shares worth 6.5 trillion won ($5.5 billion), with losers outpacing gainers 583 to 235.

Investor sentiment froze following better-than-anticipated indicators in the U.S. that suggested improvements in the U.S. economy but also raised the possibility of a U.S. rate hike down the road.

The U.S. said its consumer price index rose at the fastest clip in nearly three years last month, while its industrial output also climbed at the fastest rate since November 2014, also marking a turnaround from three consecutive months of decline.

"Recent remarks from a few members of the U.S. Federal Reserve board appear to have added to concerns over a possible U.S. rate hike in the near future," Hyundai Securities analyst Bae Sung-young said.

A U.S. rate hike often prompts a massive outflow of foreign capital from emerging markets, such as South Korea.

Institutions offloaded a net 190.1 billion won worth of shares, while foreign investors scooped up a net 28.3 billion won. Retail investors purchased a net 125.6 billion won.

Most large caps ended in negative terrain.

Market bellwether Samsung Electronics advanced 0.32 percent to 1,268,000 won, but top automaker Hyundai Motor lost 1.12 percent to 133,000 won.

Hyundai Mobis, an auto parts affiliate of Hyundai Motor, plunged 3.12 percent to 248,000 won, while top chemicals producer LG Chem tumbled 5.25 percent to 270,500 won.

The local currency closed at 1,182.60 won against the U.S. dollar, down 8.90 won from the previous session's close. (Yonhap)