South Korea expands currency swap with pension fund as won tumbles

Last Updated on June 21, 2024 9:20 am

South Korea’s foreign exchange authorities on Friday (Jun 21) said they agreed with the National Pension Service to expand a currency swap line to US$50 billion from the current US$35 billion to defend the tumbling won against the dollar.

“The foreign exchange authorities believe that the FX swap with the National Pension Service can work to alleviate the supply-demand imbalance in the foreign exchange market by absorbing the National Pension Service’s spot dollar purchase demand when the currency market is unstable,” the finance ministry said in a statement.

The move is seen as an indirect intervention into the spot dollar-won market because the swap line allows the fund to borrow from the central bank’s foreign exchange reserves instead of buying dollars in the onshore currency market.

The won slid to 1,393.0 per dollar early on Friday, the weakest level since Apr 16 and nearing a key resistance level of 1,400 closely watched by the market participants.