[Young journalist Jion Choi] An analysis showed that even if domestic residents earn dollars through overseas investment, the exchange rate may rise if the proportion of reinvesting those earnings overseas without bringing them back into Korea increases.

The Bank of Korea stated in its report released on the 18th, “BOK Issue Note: The Impact of Overseas Investment and Investment Income on the Exchange Rate.” The report explained that “due to the accumulation of net foreign financial assets, Korea’s overseas investment income surplus is highly likely to expand in the future,” while adding that “the surplus trend may not function only as a structural factor that lowers the exchange rate.” 

Shin Sang-ho, a manager of the Capital Flow Analysis Team at the Bank of Korea’s International Department and the author of the report, said, “A large trade surplus is expected due to the recent semiconductor boom and other factors, and as overseas financial assets increase, overseas investment and investment income are likely to grow further in the future.” However, he added that “because overseas investment income can be reinvested locally, an increase in investment income does not necessarily mean an immediate expansion of foreign currency inflows into Korea’s foreign exchange market.”

Usually, when companies earn money overseas and bring it back into Korea, the foreign exchange supply increases, causing the exchange rate to decrease. However, recently, there have been continuous evaluations that companies and investors reinvest the money earned overseas locally or hold it in the form of dollars, which limits the effect on domestic foreign exchange supply. 

The report stated that, according to the analysis results, when overseas investment increased by approximately 3% above the average, the exchange rate fluctuation rate increased by about 0.7% points, while an 8% increase in investment income resulted in a 0.4% point decrease. Yet, even if investment income increased, a 1% point increase in the reinvestment ratio restricted the foreign exchange supply effect, creating a 0.4% point upward pressure on the exchange rate.

The proportion of local reinvestment among Korea’s foreign direct investment income receipts remained high at around 50% after the 2010s, but it sharply decreased after the government introduced tax benefits in 2023 for companies that distributed profits earned from overseas subsidiaries back to Korea. The average reinvestment ratio from 2024 to 2025 was around 25%.

Manager Shin stated that “if overseas investment continues to expand due to future aging and slowing domestic productivity, the proportion of income retained or reinvested overseas may also increase, limiting the amount of funds flowing back into Korea’s foreign exchange market.” He added that “it is necessary to improve the foreign exchange supply and monitoring system by focusing on how much of the increasing investment income from overseas investment expansion actually flows back into Korea’s foreign exchange supply.”

▶원문 기사: 한은 "해외투자로 달러 벌어도 현지 재투자 늘면 환율 상승" (이코노미스트, 2026. 6. 18)
 

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