South Korean stocks dropped 1 percent on Friday as investors trimmed their holdings, dismayed by growing prospects of a U.S. rate hike within this year following recent Fed officials' remarks, analysts said. The local currency lost ground against the U.S. dollar.

The benchmark Korea Composite Stock Price Index fell 20.07 points to 1,973.29. Trading volume was light at 329.6 million shares worth 4.16 trillion won ($3.57 billion), with decliners surpassing gainers 572 to 263.

"The market is expected to stay quite volatile until the December FOMC meeting is over and the volatility could intensify going forward," said Koh Seung-hee, an analyst at KDB Daewoo Securities Co. "Today's downswing seems to be part of it."

The market, in particular, reacted to remarks by some Fed officials at a Thursday conference that suggested that the current economic conditions are strong enough for a rate hike, bolstering the prospects that a rate hike could come in as early as December, Koh said.

The Dow Jones industrial average fell 1.44 percent on Thursday, the sharpest drop in more than a month, apparently setting a grim tone for the Korean market.

Foreign investors and institutions drove the market decline as they sold a net 211 billion won and 43 billion won worth of shares on Friday.

Automakers and pharmaceutical companies lost marked ground.

Hyundai Motor fell 2.49 percent to 156,500 won and its smaller affiliate Kia Motors retreated 2.58 percent to 56,700 won. Major drug maker Hanmi Pharmaceutical shed 3.04 percent to 765,000 won.

Retailers also ended down, with discount outlet chain E-Mart and GS Retail dropping 2.13 percent and 7.72 percent, respectively.

Tech bellwether Samsung Electronics fell 1.29 percent and leading Internet portal operator Naver lost 2.26 percent.

Bucking the overall downward trend, cosmetics making giant AmorePacific remained bullish, jumping 3.21 percent to close at 385,500 won.

The local currency ended at 1,163.8 won against the greenback, down 5.6 won from Thursday's close. (Yonhap)