SEOUL (Reuters) – South Korea’s pension fund and central bank have agreed to expand their foreign exchange swap line and extend it by a year to the end of 2025, a move that comes as the won fell to a 15-year low .
The swap line, which allows the National Pension Service (NPS) to borrow from the central bank’s foreign reserves for foreign investment, will be expanded from the current $50 billion to $65 billion, the Bank of Korea said Thursday.
The program, seen as a market stabilizing tool, was first introduced in September 2022 and has been expanded several times since.
“This is expected to help stabilize the foreign exchange market by absorbing the pension fund’s demand to buy dollars on the spot market,” the BOK said.
The NPS will also keep its strategic exchange rate hedge ratio at a maximum of 10% until the end of next year, the Ministry of Social Affairs, which oversees the fund’s investment policy, said after a policy review meeting.