Korea FX authorities, NPS raise currency swap limit to $50 bn

The measure will strengthen the NPS' and finance ministry's resiliency to market volatility, the Bank of Korea says

Bundles of US dollars at a Hana Bank branch in Seoul (Courtesy of News1)
Byeong-Hwa Ryu 1
2024-06-21 18:02:29 hwahwa@hankyung.com
Foreign exchange

South Korea’s National Pension Service (NPS), the world’s third-largest pension fund, said on Friday it has agreed with foreign exchange authorities to increase the upper limit of currency swap lines from the current $35 billion to $50 billion to mitigate exchange risks.

The measure will strengthen the resiliency of NPS and the FX authorities – the Bank of Korea and the country’s finance ministry – to market volatility, given that the pension scheme’s overseas investment continues to rise, the central bank said on Friday.

NPS managed 1101.3 trillion won ($792.4 billion) in assets as of the end of March. Overseas assets make up around 55% of the assets under management.

The pension scheme and the authorities opened their currency swap line for the first time in 14 years in 2022, which allowed the pension fund to borrow up to $10 billion with maturities of six months or a year from BOK’s foreign exchange reserves to swap out for Korean won. The swap line increased to $35 billion in April last year.

The currency swap limit increase will help the authorities mitigate imbalances in the forex market and help NPS manage currency exchange risk for global investments, BOK added.

NPS strives to enhance its capabilities to hedge forex risks. The pension fund increased its forex hedge ratio to 10% for a year from December 2022 and extended the period until the end of this year.

Write to Byeong-Hwa Ryu at hwahwa@hankyung.com

Jihyun Kim edited this article.
#National Pension Service Korea #Korea foreign exchange swap #currency swap #NPS forex swap #Bank of Korea #forex risk hedge

Navigating choppy waters: Dollar-won FX forecasting  

Navigating choppy waters: Dollar-won FX forecasting  

Hana Bank dealing room with an electric board showing that the US dollar ended at 1,375.30 won on April 26, 2024  Late last year, when the Korean won traded at 1,288 per dollar, most market analysts and economists predicted that the Korean currency would regain ground against the US doll

S.Korea’s forex reserves dwindle to lowest point in more than 3 years

S.Korea’s forex reserves dwindle to lowest point in more than 3 years

South Korea’s foreign exchange reserves dropped in October for the third straight month to their lowest point since June 2020, as local authorities heavily sold off dollars to ease market volatility and slow the won’s retreat.The country’s forex reserves dwindled to $412.87 b

S.Korea to extend forex trading hours from Oct. 4 to lure foreign dealers

S.Korea to extend forex trading hours from Oct. 4 to lure foreign dealers

Hana Bank's FX dealing room South Korea will extend the operating hours of the domestic foreign exchange market from next month, allowing foreign currency dealers to directly participate in the Korean won transaction system.The onshore won market, which opens at 9 a.m. Seoul time, will close at

Korean exporters suffer FX derivate losses on weak won

Korean exporters suffer FX derivate losses on weak won

Bundles of $100 bills at South Korea's Hana Bank headquarters in Seoul (Courtesy of Yonhap) More South Korean exporters suffered massive losses from foreign exchange derivatives on a weaker won, failing to benefit from the unit’s depreciation that often boosts the converted value of overs

Korea FX authorities, NPS agree on currency swap; won flat

Korea FX authorities, NPS agree on currency swap; won flat

A Hana Bank official organizes bundles of South Korean won and dollars at its headquarters in Seoul on Sept. 22, 2022 (Courtesy of News1) South Korea’s foreign exchange authorities and the state-run National Pension Service (NPS) agreed to open a currency swap line for the first time in 1
(* comment hide *}