South Korean stocks closed slightly higher Tuesday as investors remained cautious after a recent rally stemming from the US central bank's dovish stance. The local currency rose against the greenback.

After choppy trading, the benchmark Korea Composite Stock Price Index gained 3.08 points, or 0.12 percent, to close at 2,602.59, ending the two-day losing streak.

Trade volume was moderate at 429.4 million shares worth 9.4 trillion won ($7.26 billion), but decliners outnumbered gainers 491 to 378.

"The US Federal Reserve's hints at a possible rate cut next year have pushed the Korean index up further over the few days and it seemingly reached a point that investors think is too high," said Jung In-ji, an analyst from Yuanta Securities Korea. "And investors are concerned about some mixed economic outlooks for next year."

Tech, financial and pharmaceutical shares finished in mixed territory, while battery and steelmakers went south.

Samsung Electronics, the world's largest memory chipmaker, rose 0.92 percent to 76,600 won and its rival SK hynix climbed 0.21 percent to 140,900 won.

Leading banking group Shinhan Financial Group gained 0.77 percent to 39,100 won, and major non-life insurer Samsung Fire & Marine Insurance added 0.98 percent to 258,000 won.

Bio firms were also in positive territory, with Celltrion increasing 1.78 percent to 188,800 won and Samsung Biologics rising 0.28 percent to 722,000 won.

But battery makers were among the biggest losers, with industry leader LG Energy Solution falling 0.95 percent to 415,500 won and Posco Future M sinking 1.97 percent to 348,000 won.

Top steelmaker Posco Holdings dropped 1.46 percent to 473,500 won, and leading zinc smelter Korea Zinc declined 0.2 percent to 500,000 won.

Defense firms also finished lower as Hanwha Aerospace tumbled 3.68 percent to 122,900 won and LIG Nex1 sank 3.76 percent to 130,600 won.

The local currency closed at 1,294.5 won against the greenback, up 8.5 won from the previous session's close. (Yonhap)