"Global investment is flocking to the U.S. … the won’s undervaluation likely to persist for now" [2026 AEA Meeting]

"A 1,500 won per dollar exchange rate is excessive … but it won’t be easy to fall below 1,400 won either"

"Korea’s labor and financial policies that deter foreign investment"

"Fears of inflation reigniting have eased … the Trump variable remains a burden"

Korean economists who attended the American Economic Association (AEA) meeting held this year in Philadelphia were preoccupied with the exchange rate and artificial intelligence (AI). As investment money from around the world pours into the United States, they were deeply concerned about how Korea could defend its exchange rate. Lively discussions also took place on how economics can contribute in relation to AI.

On the final day of the AEA meeting, the 5th (local time), Kim Sung-hyun, a professor in the Department of Economics at Sungkyunkwan University (right in photo), who attended as a member of the Korea-America Economic Association, said he does not think the won-dollar exchange rate will exceed 1,500 won, but that it also will not be easy to drop below 1,400 won as in the past. He explained that while the U.S. continues to draw global investment into its AI industry, global investors do not necessarily see Korea as an attractive place to invest.

Korea lacks many factors to attract foreign investment

Professor Kim assessed, "Exchange rates are ultimately determined by supply and demand, and because demand for dollars continues to be created (through AI and the like), the dollar’s value rises. Meanwhile, there are not many reasons for foreigners to invest in Korea."

Some argue that the surge in so-called ‘Seohak ants’ investing in the U.S. stock market is the reason, but he said it is not at a level that would sway the exchange rate.

Professor Kim pointed to the Lee Jae-myung administration’s labor and financial policies as the biggest reasons Korea is failing to attract foreign investors. He said, "A rigid labor market structure is a factor that blocks foreign investors," adding, "On this, I’d like to give an F grade."

He added, "If there were companies in Korea that foreign investors see as good places to invest, they would bring their money in," but "right now, confidence in the U.S. stock market is high, so due to currency supply-demand dynamics, (the won’s undervaluation) is inevitably the outcome."

On inflation, Professor Kim said economists’ concerns about another sharp spike have subsided. However, he noted there is considerable skepticism about whether stable readings can be maintained, given U.S. President Donald Trump’s pressure on the U.S. central bank (the Fed) to cut rates and rising global geopolitical tensions.

U.S. state governments focus on forecasting power demand

Jang Yoo-soon, a professor at Indiana State University who attended that day as a member of the Korea-America Economic Association, shared various developments related to U.S. AI investment. Professor Jang said, "U.S. state governments are competing to attract data centers," and stressed that "there is enormous demand for forecasts of power demand and the resulting power price issues when data centers come in." He explained that econometricians could build models to forecast scenarios.

If data centers are built, expectations for tax revenue rise, but at the same time there is a high likelihood that electricity bills borne by local residents with voting rights will increase.

Meanwhile, Professor Kim voiced concern about the concentration of investment in AI. He said, "AI does help real life or improve corporate efficiency, but it isn’t clearly translating into results," and predicted, "If the timing of profit realization is delayed beyond investors’ expectations, a bubble could burst due to psychological factors."

Philadelphia = Park Shin-young, correspondent nyusos@hankyung.com