South Korea pension fund, central bank expand FX swap line as won drops

SEOUL (Reuters) - South Korea's pension fund and central bank have agreed to expand their foreign exchange swap line and extend it by one year until the end of 2025, a move that comes as the won dropped to its lowest level in 15 years.

The swap line, which allows the National Pension Service (NPS) to borrow from the central bank's foreign exchange reserves for overseas investment, will be expanded to $65 billion from the current $50 billion, the Bank of Korea said on Thursday.

The programme, seen as a market stabilising tool, was first introduced in September 2022 and has since been expanded several times.



"It is expected to help stabilise the foreign exchange market by absorbing the pension fund's demand to buy dollars in the spot market," the BOK said.

The NPS will also keep its strategic foreign exchange hedging ratio at a maximum of 10% until the end of next year, the welfare ministry, which oversees the fund's investment policies, said after a policy review meeting.

Source: Investing.com