Core Viewpoint - The South Korean won has been depreciating against the US dollar, nearing its lowest level since the 2008 financial crisis, following the announcement of 24-hour trading for the won starting next year, increasing pressure on the Bank of Korea to intervene in the foreign exchange market [1][2][4]. Group 1: Currency Performance - The won has declined by 6% over the past three months, the largest drop among major currencies in the Asia-Pacific region, influenced by ongoing capital outflows from the stock market and increased overseas investments by residents [2]. - The won's exchange rate against the dollar recently approached 1487.45, just 1% shy of its historical high, marking the lowest level since March 2009 [1][2]. Group 2: Market Reactions - Following the announcement of the 24-hour trading initiative, the Korean stock index fell by 2.3%, and the won also depreciated, reaching its lowest level since mid-May [3]. - Despite the potential for increased global liquidity for the won with the upcoming market liberalization, immediate foreign capital inflows are not expected [3]. Group 3: Central Bank's Position - The Bank of Korea is under scrutiny regarding potential foreign exchange interventions, with the governor indicating a willingness to act if excessive volatility is observed, while downplaying the current depreciation trend [4]. - The economic environment is complex for the Bank of Korea, as the IMF forecasts a mere 0.9% growth for the South Korean economy this year, the lowest among major Asian economies, complicating the decision to lower interest rates to support economic recovery [4]. Group 4: Bond Market Pressure - South Korean bonds are also facing pressure, with the 10-year government bond yield rising to a 16-month high, as the market increasingly bets that the current monetary easing cycle is coming to an end [5]. - There are expectations that the Bank of Korea may require national pension institutions to sell dollars as a strategy to support the won, a tactic previously employed in late 2022 and early 2023 [5].

Core Viewpoint - The South Korean won has depreciated significantly against the US dollar, reaching its lowest level since the 2008 financial crisis, raising concerns about potential intervention by the Bank of Korea [1][4]. Group 1: Currency Performance - The South Korean won has fallen 6% over the past three months, making it the worst-performing currency in the Asia-Pacific region [3]. - The USD/KRW exchange rate is nearing the historical high of 1487.45, with the won recently trading at 1468.77 [1][3]. - The recent announcement of 24-hour trading for the won starting next year has added pressure to its value [3]. Group 2: Market Reactions - Foreign investors have sold a net $5.2 billion worth of South Korean stocks this month, despite the KOSPI index reaching historical highs [3]. - The announcement of the 24-hour trading policy did not generate positive market sentiment, as the KOSPI index fell by 2.3% on the day of the announcement [3]. Group 3: Central Bank's Position - The Bank of Korea is under pressure to intervene in the foreign exchange market, with its governor indicating a willingness to act if excessive volatility is observed [4]. - The central bank's cautious stance contrasts with other Asian economies that have recently cut interest rates to support their currencies [5]. Group 4: Economic Context - The International Monetary Fund (IMF) has projected South Korea's economic growth at only 0.9% this year, the lowest among major Asian economies [5]. - The yield on 10-year South Korean government bonds has risen to a 16-month high, indicating market expectations of an end to the current monetary easing cycle [5]. Group 5: Potential Strategies - Market participants speculate that one feasible strategy for the Bank of Korea to support the won could involve the national pension fund selling US dollars, a tactic previously employed [6]. - The National Pension Service of Korea has engaged in significant transactions to rebalance its portfolio, including selling dollars to purchase domestic stocks [6].

Group 1 - The Australian pension industry, valued at AUD 4.1 trillion (approximately USD 2.7 trillion), expressed relief over the U.S. government's decision to cancel the proposed "retaliatory tax," which would have increased tax burdens on foreign investors' asset income [1] - The cancellation of the retaliatory tax is expected to reignite investment enthusiasm among Australian pension funds and global institutional investors in the U.S. market, particularly in U.S. equities, leading to a renewed "Buy America" trend [1] - Australian pension funds have already invested approximately USD 450 billion in the U.S., covering various asset classes including infrastructure, equities, U.S. Treasuries, and corporate bonds [1] Group 2 - The U.S. Treasury's announcement of an agreement with G7 allies, which excludes U.S. companies from certain taxes in other countries, is seen as a positive outcome for large institutional investors from countries like Australia [2] - Australian Treasurer Jim Chalmers expressed concerns directly to U.S. Treasury Secretary Scott Behnke, highlighting the importance of resolving tax uncertainties for Australian pension funds seeking deeper investment opportunities in the U.S. [2] - The potential tax reform had previously caused Australian pension funds to reassess their investment positions in the U.S. due to rising uncertainties [2] Group 3 - The original proposal for the retaliatory tax led to caution among Australian institutional investors, with some, like Cbus Super, refraining from U.S. infrastructure transactions this year [3] - The Australian Superannuation Funds Association (ASFA) welcomed the recent developments but noted that further legislative action is required in the U.S. Congress to finalize the changes [3] - ASFA's Chief Policy and Advocacy Officer indicated that the potential legislative changes could alter the risk-return profile of U.S. investments for Australian funds, which would be detrimental to all parties involved [3]