Citi: South Korea's $350 billion investment in the United States may intensify pressure on the depreciation of the Korean won

According to Golden Finance, Citibank analyst Jin-WookKim said South Korea's pledge to invest $350 billion in the United States may put pressure on the won. As the lessons learned from the 1997-1998 financial crisis, South Korea is unlikely to use $416 billion in foreign exchange reserves, so public institutions may need to raise $20 billion to $30 billion in foreign currencies each year. The remaining $86 billion to $96 billion in financing may need to rely on the bond market. Large-scale bond issuance may push up financing costs and put pressure on the won. Even if private enterprises share part of the financing burden, the decline in the proportion of US dollar export income converted to Korean won due to investment in the United States may also bring about the risk of depreciation. Citi expects South Korea will ask the U.S. to provide solutions to potential foreign exchange shocks and seek to extend the duration of its investment commitments. (Jin Shi)