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Citigroup: South Korea's $350 billion investment in the US may increase pressure on the won's depreciation

Citibank analyst Jin-Wook Kim said that South Korea's commitment to invest $350 billion in the United States could put pressure on the South Korean won. Learning from the lessons of the 1997-1998 financial crisis, South Korea is unlikely to use its $416 billion in foreign exchange reserves, so public institutions may need to raise $20-30 billion in foreign currency each year. The remaining $86-96 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 South Korean won. Even if private companies share some of the financing burden, the decrease in the proportion of US export income converted into South Korean won due to US investment may also bring depreciation risks. Citibank expects South Korea to ask the United States to provide solutions for potential foreign exchange shocks and seek to extend the deadline for investment commitments. 

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