EXCHANGE-NPS agrees to increase $65 billion in currency swap deal by end of next year

In order to stabilize the won/dollar exchange rate, the Ministry of Strategy and Finance and the Bank of Korea have decided to increase the foreign exchange swap transaction limit with the National Pension Service to $65 billion.

The foreign exchange authorities agreed to extend the deadline for a foreign exchange swap contract with the National Pension Service, which expires at the end of this month, by one year to the end of next year, and also increase the limit from $50 billion to $65 billion.

The foreign exchange swap limit for the foreign exchange authorities and the National Pension Service continued to rise to $35 billion in April the following year and $50 billion in June last year, after reaching $10 billion at the time of the initial contract in 2022.

The foreign exchange swap contract between the foreign exchange authorities and the National Pension Service is a structure in which the foreign exchange authorities first supply dollars from foreign reserves and later return them when the National Pension Service needs dollars to purchase overseas assets.

Buying a large amount of dollars needed by the National Pension Service in the spot exchange market will inevitably increase dollar prices, but instead, obtaining dollars from the foreign exchange authorities can contribute to stabilizing the foreign exchange market.

During the swap transaction period, foreign exchange reserves are reduced by the amount of transaction, but the decrease in foreign exchange reserves is limited to a single time because the funds are fully returned at maturity.