Citi: South Korea's 350 billion dollar investment in the United States may exacerbate the depreciation pressure of the Korean won

Jin-Wook Kim, an analyst at Citibank, said South Korea's pledge to invest $350 billion in the US could put pressure on the won. South Korea is unlikely to dip into $416 billion of foreign exchange reserves because of the lessons of the 1997-1998 financial crisis, so public institutions may need to raise $20 billion to $30 billion in foreign currency each year. The remaining $86 billion to $96 billion in financing may need to rely on the bond market. Large-scale bond issuance could push up financing costs and put pressure on the won. Even if private companies share some of the financing burden, there is also a risk of depreciation as the proportion of US dollar export earnings converted into won decreases due to investment in the US. Citi expects South Korea to ask the US to provide a solution to a potential foreign exchange shock and to seek an extension of the duration of the investment commitment. (Kim Ten)