Foreign Exchange Authorities Extend $65 Billion Swap with National Pension Service Through End of Next Year (Comprehensive)

On the 14th, the won-dollar exchange rate fluctuated around the 1470 won level in the foreign exchange market, and the exchange rate was displayed at a private currency exchange office in Jung-gu, Seoul. 2025.11.14 Photo by Dongju Yoon

The foreign exchange authorities have agreed with the National Pension Service to extend their $65 billion foreign exchange swap agreement, which was set to expire at the end of this year, through the end of next year. This move is expected to have some stabilizing effect on the market amid the recent upward trend in the won-dollar exchange rate.

On December 15, the Ministry of Economy and Finance and the Bank of Korea, along with other foreign exchange authorities, announced, "The foreign exchange swap agreement can absorb the National Pension Service's demand for spot dollar purchases during periods of foreign exchange market instability, thereby contributing to market stability."

To prevent the National Pension Service from directly sourcing dollars in the market for overseas investments-which could impact the exchange rate-the Bank of Korea has entered into a swap agreement to lend dollars from its foreign reserves, renewing the contract annually.

The foreign exchange authorities also stated that the National Pension Service believes using foreign exchange swaps for overseas asset hedging during sharp exchange rate increases can mitigate currency fluctuation risks associated with overseas investments, thereby supporting the fund's returns.

The Ministry of Economy and Finance explained, "While the foreign reserves decrease by the transaction amount during the swap period, all funds are returned at maturity, so the reduction in foreign reserves is only temporary."

The National Pension Service is a major player in the foreign exchange market, with overseas investments in assets such as stocks and bonds amounting to 771.31 trillion won as of the end of August. The scale of its overseas asset investments exceeds South Korea's foreign reserves, which stood at $428.82 billion (approximately 632 trillion won) at the end of September.

Earlier in the day, the National Pension Fund Management Committee held its seventh meeting of 2025 at the Government Complex Seoul, where it reviewed and approved proposals including the "temporary extension of the strategic currency hedge period" and the "extension of the foreign exchange swap." The committee had temporarily extended the strategic hedge period until the end of this year in response to stabilization following the sharp rise in exchange rates last December, but has now decided to further extend this period through next year.