Strain on Korea-U.S. Currency Talks Over NPS's Overseas Investments

As financial authorities from Korea and the U.S. gear up for currency negotiations following the '2+2 trade consultations,' the National Pension Service's (NPS) aggressive overseas investment strategy is under scrutiny. Experts suggest these investments could become a contentious point, with the U.S. possibly arguing they contribute to the won's weakness.

The NPS's Investment Strategy and Its Implications

The NPS has significantly increased its overseas investments, with overseas stock investments more than doubling and bond investments nearly doubling by the end of last year. This strategy, aimed at diversifying assets and increasing returns, has led to substantial dollar purchases, potentially affecting the won-dollar exchange rate.

U.S. Concerns and Potential Repercussions

The U.S. Treasury has previously highlighted the NPS's overseas investments as a factor in the won's depreciation. With the upcoming currency report, there's speculation that the U.S. might use this issue as leverage in broader negotiations, including tariffs.

Looking Ahead

While the likelihood of Korea being labeled a currency manipulator remains low, the situation underscores the need for a nuanced approach in negotiations. The Korean government is expected to argue that external factors, like global dollar strength, have played a significant role in the won's performance.