SEOUL (Reuters) – South Korea's pension fund and central bank have agreed to extend their foreign exchange swap line by one year to the end of 2025, a move that comes as leverage fell to a 15-year low.
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 Thursday.
The program, seen as a market stabilizing tool, was first introduced in September 2022 and has been extended several times since then.
“It is expected to help stabilize the foreign exchange market by accommodating the pension fund's demand to buy dollars on the spot market,” said the BOK.
The NPS will also maintain the strategic hedge ratio for foreign exchange at a maximum of 10% until the end of next year, the welfare ministry, which oversees the fund's investment policies, said after a meeting – policy review.
