SEOUL : South Korea’s central bank and national pension fund are in discussions to expand their foreign exchange swap programme of $35 billion, officials in charge of foreign exchange said on Friday.
They are in talks to raise the amount, but nothing has been decided, one official said.
Another official said discussions have been ongoing since the won was weakening a month ago to prepare a measure needed for market stabilisation. Both officials declined to be identified because of the sensitivity of the matter.
The Bank of Korea said last December a market stabilising tool was needed and that it would consider increasing the amount of the swap line if necessary, as it agreed with the National Pension Service (NPS) to extend the programme until the end of this year.
The NPS declined to comment. The welfare ministry, which oversees the NPS’s investment policy, did not have immediate comment.
The swap line was first introduced in late 2022 and expanded in early 2023 to mitigate downward pressure on the won due to the NPS’ growing demand for overseas investments. It allowed the pension fund to borrow the central bank’s foreign exchange reserves instead of buying dollars in the onshore currency market.
In April, the won touched 1,400 per dollar, a 17-month low, against a broadly firmer U.S. currency. It has weakened 6.7 per cent against the dollar so far this year, extending losses for a fourth consecutive year.
