South Korean stocks snapped a three-day winning streak on Wednesday as uncertainties surrounding the US banking crisis reignited recession fears ahead of the Federal Reserve's policy meeting this week. The local currency edged up against the US dollar.

The benchmark Korea Composite Stock Price Index retreated 22.99 points, or 0.91 percent, to close at 2,501.40. Trading volume was moderate at 877.4 million shares worth 9.72 trillion won ($7.26 billion) with decliners outnumbering gainers 524 to 341.

"US regional bank risks re-emerged with moves to tighten banks' loan requirements, reigniting fears over a recession," Mirae Asset analyst Seo Sang-young said.

"Given the prolonged concerns over high inflation, the possibility of the Fed making hawkish comments after its policy meeting has dampened investor sentiment," Seo said.

Market watchers bet the Fed is likely to signal an end to its rate hike cycle after raising the interest rate by 0.25 percentage point at the end of the Federal Open Market Committee meeting on Wednesday.

Wall Street ended the session down overnight as uncertainties arose over the financial system following the sale of the First Republic Bank to JPMorgan Chase & Co., led by Federal Deposit Insurance Corp.

In Seoul, chemical and tech blue-chip stocks drove down the Kospi.

Top battery maker LG Energy Solution slumped 4.06 percent to 567,000 won, and its chemicals-making parent LG Chem dipped 2.68 percent to 726,000 won.

Tech heavyweight Samsung Electronics lost 0.46 percent to 65,400 won.

Battery components maker Posco Future M slid 2.13 percent to 345,000 won.

Entertainment agency Hybe closed up 3.51 percent to 294,500 won following its record high quarterly earnings the previous day.

SK IE Technology, a battery separator manufacturer under South Korea's SK Group, jumped 6.1 percent to 83,500 won on rosy prospects as it is expected to benefit heavily from the US Inflation Reduction Act designed to boost domestic production in green energy.

The local currency ended at 1,338.20 won against the US dollar, up 3.9 won from Tuesday's close. (Yonhap)