The Bank of Korea evaluated that the future foreign exchange hedging volume of the National Pension Service will contribute to the stability of the won-dollar exchange rate. It also viewed that the political agreement to activate the ruling and opposition parties' consultative body and the appointment of constitutional court judges will help stabilize the exchange rate.
On the 2nd, Yoon Kyung-soo, Director of the International Department at the Bank of Korea, stated, "It is expected that foreign exchange hedging volume will soon come out from the National Pension Service according to its internal decisions," adding, "This will contribute to exchange rate stability."
The National Pension Service conducting foreign exchange hedging means that when the won-dollar exchange rate level exceeds a certain standard, it sells part of its overseas assets through forward foreign exchange contracts. In this process, if the won-dollar exchange rate actually falls, the National Pension Service gains a profit and can lower the exchange rate by selling dollars.
It is also known that the work of the foreign exchange authorities directly supplying dollars necessary for the National Pension Service's overseas asset purchases, according to the foreign exchange swap contract concluded between the National Pension Service and the foreign exchange authorities, is beginning in earnest. The Bank of Korea explained that as dollar demand decreases, it will act as downward pressure on the exchange rate.
The political movement toward an agreement on the consultative body between the ruling and opposition parties was also evaluated to help stabilize the exchange rate. Director Yoon said, "At the end of last month, the leaders of the ruling and opposition parties met and agreed to activate the ruling-opposition-government consultative body, and two constitutional court judges were also appointed," adding, "From an overseas perspective, the heightened uncertainty and tension in Korean politics seem to have eased."
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