▲AI PRISM* Customized Economic Briefing
*Editor's Note: 'AI PRISM' (Personalized Report & Insight Summarizing Media) is an "AI-based customized news recommendation and summary service" developed with support from the Korea Press Foundation. It selects and provides six customized news items by reader type.
[Key Issue Briefing]
■ Won Weakness Accelerates: The won-dollar exchange rate continues its steep climb amid foreign investors' selling on the KOSPI and expectations of further U.S. interest rate hikes. Experts anticipate that the upper end of the exchange rate in the second half could exceed the level seen during the 2009 global financial crisis.
■ Yen Value Plunges: The yen has fallen to its lowest level in about 40 years, yet the weakening trend has not reversed despite the Japanese government's market intervention and interest rate hikes. As a result, the market view that the yen could fall further is gaining strength.
■ Monetary Policy at a Crossroads: In the United States, the Federal Supreme Court put the brakes on the president's dismissal of a Fed governor, keeping the central bank independence controversy alive. Meanwhile, in Europe, the ECB drew a line by stating there would be no ultra-aggressive tightening as in the past, illustrating the diverging monetary policy directions among major economies.
[News of Interest to Global Investors]
1. "Exchange Rate Could Top 1,600 Won"…Even a July Rate Hike Falls Short
- Key Summary: The won-dollar exchange rate is rising steeply amid a combination of factors, including expectations of further U.S. rate hikes, foreign selling of domestic stocks, and yen weakness. In a survey conducted by Seoul Economic Daily of leading economists and exchange rate experts, 1,600 won was cited as the upper end of the exchange rate band for the second half. This exceeds the closing-price high of the 1,570 won range seen during the 2009 global financial crisis. Experts also forecast that if foreign investors' portfolio rebalancing continues and the U.S. actually raises rates, upward pressure on the exchange rate will grow even stronger.
2. Yen Hits Lowest Level in 40 Years…"165 Ahead" Forecast Emerges
- Key Summary: The yen fell to as low as 161.78 per dollar at one point in the New York foreign exchange market, marking its lowest level in about 40 years. Despite the Japanese government's largest-ever market intervention and the Bank of Japan's benchmark rate hike, the weak-yen trend has not reversed. The Japanese government's announcement of large-scale investment plans in strategic sectors such as artificial intelligence (AI) and semiconductors, which heightened concerns over national debt, was also cited as a factor in the yen's weakness. Meanwhile, with the possibility of a U.S. rate hike within the year being discussed, some forecast that the yen could fall further to 165.
3. Foreign Investors Dumped 150 Trillion Won on KOSPI in First Half
- Key Summary: In the first half of this year, foreign investors net-sold nearly 150 trillion won worth of shares on the KOSPI market, with individual investors filling the gap. The selling was concentrated in top market-cap stocks such as Samsung Electronics (005930.KS) and SK hynix (000660.KS), with a recurring pattern of selling clustering at the end of each month and quarter. Securities analysts interpret this trend as rebalancing to adjust portfolio weightings. However, with momentum such as large-cap earnings releases and SK hynix's listing of American Depositary Receipts (ADRs, depositary receipts for shares listed on overseas markets) scheduled for July, the possibility of foreign capital inflows is also being raised.
[Reference News for Global Investors]
4. U.S. Supreme Court Halts Trump's Dismissal of Fed Governor; Recognizes Other Independent Agencies
- Key Summary: The U.S. Federal Supreme Court put the brakes on U.S. President Donald Trump's dismissal of Federal Reserve Governor Lisa Cook. The court ruled that Cook may remain in her position while the dismissal-related litigation proceeds, lending weight to the Fed's independence. On the other hand, the same day, the court ruled that the dismissal of a Federal Trade Commission (FTC) member was lawful, partially overturning a 91-year-old precedent that had restricted the dismissal of officials at independent agencies. The ruling is expected to affect other independent agencies such as the Federal Communications Commission and the Securities and Exchange Commission.
- Key Summary: The National Pension Service's cap on its domestic stock holdings will be applied at 20.8% of the total fund from July. The NPS fund management division plans to apply a moving-average method to the weighting calculation, carrying out rebalancing gradually rather than unloading volume all at once. Adding the limits for strategic asset allocation (SAA) and tactical asset allocation (TAA), domestic stocks can be held at up to 28.8% of the fund's size. However, if the KOSPI index surges further beyond 9,000 points, some analysis suggests the scale of selling itself could grow, as Shinyoung Securities estimates.
6. Lagarde: "No 2022-Style Ultra-Aggressive Tightening"…ECB Signals Gradual Rate Adjustment
- Key Summary: European Central Bank (ECB) President Christine Lagarde said the eurozone does not need to undertake ultra-aggressive tightening like that of 2022-2023. After the recent consumer price inflation rate came in at 3.2%, the ECB raised its deposit rate by 0.25 percentage point to 2.25%, becoming the first among the Group of Seven (G7) central banks to raise rates. Lagarde explained that this hike was not a preemptive insurance measure but a decision justified by the inflation outlook. She stressed that future monetary policy will be decided based on economic indicators at each meeting, without complex forward guidance.
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