Foreign Exchange Authorities Agree to Conduct $35 Billion Forex Swap Transaction with National Pension Service

The foreign exchange authorities (Bank of Korea and Ministry of Economy and Finance) announced on the 13th that they have agreed to conduct foreign exchange swap (FX Swap) transactions with the National Pension Service within a limit of 35 billion dollars until the end of this year. The maturity for each transaction will be 6 months or 12 months, the same as last year.

Last year, the two institutions effectively responded to increased volatility in the foreign exchange market through FX Swap transactions, and based on this experience, they decided to resume the transactions this time. The National Pension Service explained that through this transaction, it will be able to mitigate exchange rate fluctuation risks associated with overseas investments and improve the efficiency of foreign currency fund management.

A foreign exchange authority official stated, "In times of foreign exchange market instability, by absorbing the National Pension Service's demand for spot foreign exchange purchases, we can help alleviate supply-demand imbalances in the foreign exchange market," adding, "Although foreign exchange reserves will decrease during the contract period due to this transaction, the funds will be fully restored upon maturity, so the decrease in foreign exchange reserves is temporary."

[Image source=Yonhap News]