South Korea central bank, NPS agree to extend currency swap agreement for another year

SEOUL, Dec 15 : South Korea's central bank and the national pension fund have agreed to extend their foreign exchange swap line to the end of 2026, a move aimed at stabilising the dollar-won market as the won hovers near the weakest level in 16 years.

The facility allows the National Pension Service to borrow U.S. dollars from the Bank of Korea's foreign exchange reserves to fund its overseas investment, easing selling pressure on the won.

The NPS will also keep its strategic foreign exchange hedging ratio at the current maximum of 10 per cent throughout 2026, the welfare ministry, which oversees the fund's investment policies, said after the National Pension Fund Management Committee held a meeting.

"Given that exchange rates have remained elevated this year, the Committee determined that an additional extension through next year was warranted," the statement said.

The won immediately gained after the announcement, up 0.71 per cent against the dollar at 1,466.5 as of 0915 GMT, as the move was seen to support the won should the NPS activate the scheme by selling the U.S. currency.