South Korean stocks closed marginally lower Thursday, snapping a three-day winning streak, amid growing expectations the US Federal Reserve may pause the interest rate hike after a set of fresh economic data signaled a cooling economy. The local currency inched up against the US dollar.

The benchmark Korea Composite Stock Price Index fell 4.95 points, or 0.19 percent, to close at 2,556.27. Trading volume was moderate at 461.5 million shares worth 10.8 trillion won ($8.16 billion), with decliners outnumbering gainers 515 to 352.

"The private sector hiring and payrolls show signs of a slowdown in US employment. They are about the right data we need at a time when the Fed is uncomfortable about further tightening," Han Ji-young, an analyst at Kiwoom Securities Co., said.

The US economy grew at a 2.1 percent annual pace in the second quarter, falling short of a 2.4 percent expansion estimate.

Payrolls in the private sector slowed more than expected to 177,000 in August in a sign of a moderate labor market.

The latest economic data reinforced the expectation that the Fed will not raise the interest rate at its upcoming policy meeting in September.

The adjustment of the asset portfolio in the Morgan Stanley Capital International Korea Index, a measurement of performance, also affected the KOSPI's movement, Han noted.

The MSCI, a fund investment benchmark, revises the asset allocations, known as rebalancing, in August every year to minimize risk exposure.

Battery material maker EcoPro, shipbuilder Hanwha Ocean, JYP Entertainment and Hanmi Semiconductor have been added to the MSCI Korea Index, while CJ and E-Mart have been ejected.

"The rebalancing usually incurs a technical buying and selling of foreign funds that follow the MSCI Korea Index, affecting the foreign inflow," Han said.

Foreigners were net sellers by unloading a net 213.1 billion won. Institutions bought a net 159.3 billion won, and individual investors scooped up 13.3 billion won.

Large-cap bio and IT stocks were the biggest decliners.

Biotech firm Samsung Biologics fell 2.38 percent to 737,000 won, and internet portal operator Naver lost 1.38 percent to 214,500 won.

National flag carrier Korean Air slipped 1.08 percent to 22,800 won.

Top-cap Samsung Electronics shed 0.3 percent to 66,900 won. Top battery maker LG Energy Solution slid 1.63 percent to 544,000 won.

Leading chemicals producer LG Chem advanced 1.22 percent to 583,000 won.

Internet-only bank KakaoBank rose 1.93 percent to 26,350 won.

The local currency ended at 1,321.80 won against the US dollar, up 1.6 won from Wednesday's close. (Yonhap)