South Korean Foreign Minister Cho Hyun said on Thursday that the announcement of Seoul's investment plans in the United States, within the framework of its trade agreement with Washington, has been postponed until some procedural issues are clarified, without going into further details.
Chu made these statements at the airport before leaving for the United States. He is scheduled to meet US Secretary of State Marco Rubio for talks on Friday.
This week, the South Korean government postponed a scheduled briefing to a parliamentary committee on its investment plans, and set a new tentative date for it on September 22, according to an informed official and media reports.
Lawmakers describe this parliamentary briefing as one of the final steps before Seoul and Washington set the final terms for a huge South Korean investment pledge in the United States.
The postponement of Thursday's briefing comes at a time when the two allies continue negotiations on the details of a trade agreement concluded last year, under which Seoul committed to investing $350 billion in the American manufacturing sector, in exchange for reducing customs duties on Korean imports to 15 percent.
Two officials in Seoul said that the dates for the parliamentary briefing and final announcement have not yet been decided, as negotiations continue.
South Korean news agency Newsy reported on Wednesday, citing a Korean parliamentary official, that the two allies are likely to hold a memorandum of understanding signing ceremony on September 23.
The implementation of the trade agreement witnessed delays, which prompted US President Donald Trump to threaten South Korea with higher tariffs earlier this year.
Of the total investments pledged by Seoul amounting to $350 billion, $150 billion has been allocated to the shipbuilding sector, while the two governments are working to finalize the terms of proposed projects for the remaining amount, amounting to $200 billion.
Several South Korean media outlets, including the Korea Economic Daily and Chosun Ilbo, reported this week that one of the proposals under discussion includes the possibility of South Korea acquiring a stake in the American company Westinghouse, which specializes in nuclear reactor technology.
According to reports, Seoul is seeking to acquire a minority stake in Westinghouse, with funding from its broader strategic investment fund in the United States, as part of a package that includes plans to build up to eight new nuclear reactors in the United States. Six of them are based on Westinghouse technology, and two are based on a South Korean model.
Other projects include plans to build a 6.3 gigawatt gas-fired power plant in the Encinal area of Texas, at an estimated cost of $22 billion, to meet the growing demand for energy needed for artificial intelligence data centers, according to media reports.
Reports also indicated that Seoul is considering participating in a liquefied natural gas project in Alaska.
The Indian rupee recovered after early falling below the Rs 96 level against the dollar, to trade slightly higher on Thursday, supported by possible intervention from the Reserve Bank of India and traders reducing their bets on the currency's decline, at a time when the rupee is still facing multiple pressures.
The US Federal Reserve's interest rate hike and signs of further monetary tightening have put pressure on the rupee, adding to the pressures resulting from rising oil prices in light of the Iran-related war, according to Reuters.
However, dollar selling by government banks, likely on behalf of the Reserve Bank of India, helped reverse the trend and supported the currency.
Traders' reduction of their bets on the rupee's decline also contributed to enhancing its gains, as it rose to 95.90 rupees against the dollar, recovering from the lowest level recorded at 96.0925, and recording an increase of 0.1 percent from Wednesday's closing level.
The yield on India's benchmark 10-year bond rose slightly following the Federal Reserve's decision to raise interest rates, while traders increased their bets that the Reserve Bank of India may raise interest rates over the next year.
Swaps markets priced interest rate increases of about 90 basis points during that period, reflecting expectations that India may need to join a cycle of global interest rate hikes from which it has so far been spared.
Peer countries such as Indonesia, South Korea and the Philippines have been raising interest rates over the past few months, following the lead of major global monetary authorities such as the European Central Bank and the Bank of Japan.
Mitsubishi UFJ Bank said in a note that “the rise in US yields and the Federal Reserve’s continued policy of keeping interest rates high for a longer period may put pressure on Asian currencies.” Regional currencies recorded a decline of between 0.1 and 0.4 percent on Thursday.
Meanwhile, investors are also monitoring developments resulting from the passage of US legislation that gives the US President the power to impose strict tariffs of up to 100 percent on China and India, among other countries, with the aim of reducing dependence on Russian energy.
For its part, India pledged to protect energy security, and warned that such tariffs could affect relations between Washington and New Delhi.
Fundamental pressure on the rupee
In a separate assessment, Axis Bank said the rupee may need to depreciate further to keep pace with shifts in the fundamentals of trade, coupled with relatively lower productivity gains resulting from artificial intelligence.
Using the Fundamental Equilibrium Exchange Rate (FEER) model, the bank noted that the rupee was close to its fair value in March, but a terms-of-trade shock caused by higher oil prices due to Iran-related tensions, combined with smaller AI-driven productivity gains compared to other economies, may warrant further adjustment.
“A persistent terms-of-trade shock and a 5 percent loss in relative productivity associated with AI theoretically translates into an additional 10 percent decline in the real effective exchange rate within one year,” Tanay Dalal, an economist at Axis Bank, said in a note on the rupee outlook published on Wednesday.
Dalal expects the rupee to fall to 97 to the dollar by the end of the year, and to 100 by June 2027, levels that are weaker than futures markets indicate. In contrast, the average forecast of economists polled by Reuters set the rupee range between 95.25 and 96.80 over the next year.
The rupee has declined by 6 percent since the beginning of the year, making it among the worst-performing Asian currencies, in light of rising oil prices, slowing capital flows, and rising global bond yields.
Axis Bank research shows that India's "primary balance", which excludes volatile foreign portfolio flows and the impact of central bank interventions in the currency futures market, has recorded a deficit of $180 billion since mid-2023, even though the current account deficit averaged only 0.6 percent of GDP during the same period.
The bank estimates that the Reserve Bank of India sold about $250 billion to support the rupee during that period.
India has maintained a sustainable current account deficit of 2 percent for decades, but this level may have fallen to zero in recent years, indicating that the rupee can no longer withstand only limited external imbalances without weakening, according to Axis Bank.
The Federal Reserve is gaining more confidence in its ability to confront inflation, after raising interest rates for the first time since 2023, but the lack of clarity on the extent of tightening that the bank may continue to implement is likely to keep stock and bond markets vulnerable to volatility in the coming weeks.
On Wednesday, the Federal Reserve raised interest rates by 25 basis points to a range between 3.75 and 4.00 percent, in a move that was widely expected, with inflation continuing above the bank’s target of 2 percent, despite US President Donald Trump’s repeated calls to reduce interest rates.
But the markets are now facing a different investment environment, in light of the lack of clarity on the extent of the tightening that the Federal Reserve seeks to achieve. Higher interest rates may reduce the attractiveness of assets that are more sensitive to borrowing costs, including small-cap stocks.
Matthew Miskin, co-head of investment strategy at Manulife John Hancock Investments, said the meeting “makes them look independent... and that boosts confidence in the market,” but he added that the Fed may have appeared more stringent than it should have been during the meeting, and that markets will need to monitor how the economy responds in the coming months.
Many investors saw the meeting as a test of the independence of the new Fed Chairman, Kevin Warsh, who was chosen by Trump.
Marta Norton, chief investment strategist at Empower, said that one of the conclusions she hopes investors will come away with is that “economics trumps politics in the Fed, at least for now.”
Raising interest rates unanimously raises the tone of hawkishness
Higher interest rates slow the economy by increasing borrowing costs for consumers and companies, and may also put pressure on the performance of stocks and other high-risk assets.
The markets had entered 2026 pricing in a reduction in interest rates, but that changed after the US-Israeli war against Iran in late February, which pushed energy prices and inflation higher, and shifted investors’ expectations towards the possibility of an interest rate hike.
The Federal Reserve raised the interest rate by a quarter of a percentage point, on Wednesday, to a range of 3.75-4.00 percent, while investors noted that the decision was unanimously approved by bank officials, after the decision to keep the interest rate unchanged at the July meeting came with a majority of 9 votes to 3.
David Krakauer, vice president of portfolio management at Mercer Advisors, said that the unanimous rate hike “significantly raises the possibility of another increase before the end of the year,” adding that investors who were preparing for a rate cut cycle in early 2026 need to completely recalibrate their positions.
Stocks fell after the Fed meeting, as the Standard & Poor's 500 index closed down 0.45 percent. Two-year and 10-year Treasury bond yields also rose, with the benchmark 10-year bond yield reaching 5.02 percent at the end of Wednesday's trading, exceeding the 5 percent level that markets are closely monitoring. The dollar also rose strongly against a basket of major currencies.
Danny Zaid, portfolio manager at Twenty Four Asset Management, said that the meeting “came as stringent as possible,” whether in terms of directions, message, or the unanimous decision to raise interest rates.
Markets are anticipating the next increase
Forecasts issued on Wednesday showed that Fed officials expect to raise interest rates again this year, then keep them unchanged in 2027.
Karen Manna, fixed income strategist at Federated Hermes, said that a large part of the risks of monetary tightening have already been priced in, but the most important signal is to know whether the Fed believes that the expected increase is sufficient, or whether it represents the beginning of additional increases.
At the end of Wednesday's trading, Fed Funds futures contracts show close odds of raising interest rates at the next Federal Reserve meeting in October, which precedes the US congressional midterm elections, while markets are pricing in additional increases in 2027.
Inflation has remained higher than the Federal Reserve's annual target of 2 percent for several years, while the latest annual core inflation rate according to the personal consumption expenditures index reached 3.3 percent, which is the indicator that bank officials rely on to monitor the basic trend of inflation.
Warsh's speech in late August during the Jackson Hole conference was considered hawkish, which strengthened investors' expectations of a rate hike, before it was supported by inflation data that came higher than expected last week.
On the other hand, the decision of the new Fed Chairman to avoid providing clear advance directives regarding the path of interest increased the uncertainty on Wall Street. His press conference following the July meeting left investors confused about his approach to inflation, and was followed by a rise in long-term Treasury yields.
Colin Martin, head of fixed income research and strategy at Schwab Center for Financial Research, said Warsh provided the bond market with more clarity about the continued strength of underlying inflation trends.
Investors are currently reconsidering how to adapt their investment portfolios to the high interest rate environment.
Phil Blancato, chief market strategist at OSAIC, said investors should not “overreact to a single meeting,” but added that if the decision turns out to be the start of a rate-hiking cycle, it may be appropriate to reduce maturities and reduce exposure to some small-cap stocks.
