By Jihoon Lee, Cynthia Kim and Yena Park SEOUL, Jan 16 (Reuters) - South Korea's planned investment of $350 billion in strategic U.S. sectors under a trade deal is unlikely to kick off in the first
South Korea's $350 Billion Investment in U.S. Delayed Beyond H1 2026
Investment Plans and Economic Concerns
By Jihoon Lee, Cynthia Kim and Yena Park
Current Forex Situation
SEOUL, Jan 16 (Reuters) - South Korea's planned investment of $350 billion in strategic U.S. sectors under a trade deal is unlikely to kick off in the first half of 2026, Finance Minister Koo Yun-cheol said, meaning the weak won currency should not face major new dollar outflows.
Government Measures to Stabilize Currency
The allies agreed to cap annual dollar investment outflows at $20 billion under a November trade deal that cut President Donald Trump's tariffs on imports from South Korea, which agreed in turn to invest $350 billion in U.S. strategic sectors.
Future Investment Projects
"It's unlikely," Koo told Reuters in an interview on Friday, when asked if the investment could begin in the first half of this year.
"Even if a nuclear power plant gets selected, for example, there will be process to follow such as finding a location, designing it and building them, so the initial outflows could be much smaller than that," Koo added.
He was referring to an annual cap of $20 billion on outflows agreed by the two countries.
"Not a lot (of investment) can be made under the current forex situation, at least for this year."
Koo ruled out further macro-prudential measures to slow the won's decline.
"Imposing additional regulations isn't something we're thinking about at a time when we are headed to the MSCI and when the won needs to be internationalised, with a more liberal capital market," he added.
An upgrade to developed market status by Morgan Stanley Capital International (MSCI) is one of President Lee Jae Myung's major policy pledges since he taking office in June 2025.
Koo's comment followed remarks on Thursday by deputy finance minister Choi Ji-young that the government was considering new measures to curb dollar demand among domestic investors, thoguh he gave no details.
South Korea sets caps on banks' foreign forward positions.
SLUMPING CURRENCY ADDS TO CONCERNS
The slumping won is a worry for Seoul officials planning for such large outflows, as it nears levels unseen since the global financial crisis from 2007 to 2009, even though exports are humming and the stock market jumped 76% last year.
Koo warned traders not to test the resolve of authorities on the won, which pared losses after his remarks to trade at 1,470.2 against the dollar by 0743 GMT.
Earlier it had hovered near 16-year lows of 1,473.8, after weakening more than 2% this year.
"It is true that there is deprecation pressure in the foreign exchange market that is somewhat bigger than we thought," Koo said.
The government will swiftly adopt recently unveiled market-stabilising measures, because herd-like behaviour in the markets could push the won down, Koo said.
"That's not something we will tolerate," he added.
Koo said the United States appreciated South Korea's recent efforts to keep the won from depreciating, a currency movement the U.S. does not want.
On Wednesday, U.S. Treasury Secretary Scott Bessent said he had discussed with Koo that the currency's recent depreciation was not in line with South Korea's economic fundamentals.
PACKAGE PLANNED AS SOON AS POSSIBLE
Koo said the government planned to implement the investment package as soon as possible.
It would ask parliament to start reviewing a bill proposed last year to set up a special fund for the package from February, he said, but added that uncertainty over an expected U.S. court ruling on Trump's tariffs could affect the process.
No specific projects have yet been agreed under the deal, but they could involve nuclear power plants as flagged by U.S. Commerce Secretary Howard Lutnick, Koo said.
The government's efforts to rein in the won have failed to sway the currency very far from the key psychological level of 1,500 to the dollar.
Such efforts included spurring the National Pension Service to sell dollars and pushing exporters to convert more of their overseas earnings into won.
Last week, the government raised its growth forecast for this year to 2.0% from 1.8%, which Koo attributed largely to strong semiconductor demand in the era of artificial intelligence, calling it a "blessing for South Korea".
To boost the potential for growth the government will invest in technologies from AI and biopharmaceuticals to nuclear energy and food, Koo said, moves that will help ease investor pessimism on the South Korean economy and currency.
(Reporting by Jihoon Lee, Cynthia Kim and Yena ParkEditing by Ed Davies and Clarence Fernandez)
