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Authorities begin talks on extending currency swap deal with NPS

Published: 01 Dec. 2025, 09:59 Updated: 01 Dec. 2025, 14:07

The foreign exchange rate of the Korean won is shown at a money exchange in Jung District, central Seoul, on Dec. 30, when the won-dollar exchange rate closed at 1,472.5 per dollar, up 5 won from the previous session. [YONHAP]

Korea's foreign currency (FX) authorities said Monday that they have begun discussions on extending their currency-swap arrangement with the state pension operator, the Finance Ministry said.

As the won continues to weaken against the dollar, the Ministry of Economy and Finance, the Bank of Korea (BOK), the National Pension Service (NPS), and the Ministry of Health and Welfare overseeing the pension fund formed a joint consultation body last month.

During the latest meeting of the four-way body held Sunday, the authorities began detailed discussions on extending the currency-swap contract, which is set to expire at the end of this year, the Finance Ministry said.

Under an agreement, the NPS can borrow up to $65 billion from the BOK's foreign reserves in exchange for its local-currency holdings.

The currency swap deal was first established in September 2022 with an initial limit of $10 billion. Since then, the limit has been expanded to $50 billion in June 2024 and again to $65 billion in December 2024.

Officials at Sunday's meeting said they would implement various measures to address imbalances in the supply and demand structure of the FX market, the ministry said.

As part of such efforts, the government will regularly review FX transactions and overseas investment activities by exporters, and consider providing policy support when needed.

Other measures under discussion include inspections of investor-protection practices related to overseas investment products, targeting securities firms and other financial institutions.

Following the creation of the consultative body, market observers said talks could also include reviewing the NPS' strategic currency-hedging program, especially amid speculations that the government may be attempting to use the NPS — which has a growing overseas portfolio — to defend the depreciating local currency.

The NPS, the world's third-largest pension fund, is permitted to hedge up to 10 percent of its overseas assets when the FX rate stays above its long-term average for a certain period.

Finance Minister Koo Yun-cheol earlier stressed that discussions are not intended as a temporary measure to mobilize the pension fund to counter the won's depreciation.

Yonhap