National Pension Service and Bank of Korea agree $10 billion currency swap in response to exchange rate surge

As the dollar-earning exchange rate hits new highs every day, the National Pension Service and the Bank of Korea decided to resume foreign exchange swaps for the first time in 14 years.

According to the Ministry of Health and Welfare, the National Pension Fund Management Committee held its 5th committee meeting on the 23rd and it was decided to sign a foreign exchange agreement in October to raise dollars through the Bank of Korea within the limit of $10 billion by the end of the this year, said the Ministry of Health and Welfare.

A foreign exchange is a contract for short-term financing using a currency exchange format When the contract expires, the National Pension Service will invest in dollars held by the Bank of Korea instead of buying dollars in the foreign exchange market when there will be a demand for foreign currency for foreign investment

When receiving dollars, the National Pension Service pays the Bank of Korea in KRW applying the exchange rate of the day of the transaction, and on the maturity date, the KRW is returned by applying the exchange rate that takes into account the exchange points (the difference between the forward exchange rate and the spot exchange rate) on the day of the transaction while repaying the dollar.

The maturity of each case is set at 6 months or 12 months, which is longer than the maturity of foreign exchange swaps in general commercial banks, so the NPS can reduce transaction risks and costs.

This foreign exchange change is interpreted as a measure that reflects the recent exchange rate crisis, where the won-dollar exchange rate exceeds 1,400 won. In addition, it is expected to contribute to the stabilization of supply and demand in the foreign exchange market by ensuring the stability of foreign investment funds in a situation where foreign investment increases every year.

Isran, director of pension policy at the Ministry of Health and Welfare, said, “I do not believe it is a measure to stabilize the exchange rate. From the point of view of the National Pension Service, it is necessary to make foreign investments in any case and ensure stable foreign currency,” he said.

He added, “It’s true that, by the way, it helps supply and demand the (foreign exchange) market, but I didn’t do it because of this.”

Meanwhile, on the same day, the committee also discussed and voted on revising the National Pension Fund Management Guidelines, which raises the National Pension Service’s short-term foreign currency reserves limit by US$600 million (based on the daily average). balance of the quarter) to US$3 billion.

[ 경기신문 = 이지민 기자 ]

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