Core Viewpoint - The National Pension Service (NPS) of South Korea has initiated a foreign exchange swap agreement with the Bank of Korea to stabilize the Korean won, which has been one of the worst-performing currencies in Asia this year [1][2]. Group 1: Foreign Exchange Swap Agreement - The NPS has started a foreign exchange swap agreement with the Bank of Korea [1][2]. - The NPS has also begun currency hedging transactions with the central bank, although the nature of these hedges (tactical or strategic) has not been disclosed [1][2]. Group 2: Currency Stabilization Efforts - The NPS has reportedly started selling US dollars to support the Korean won's exchange rate [1][2]. - As the largest institutional investor in South Korea, the NPS manages approximately $542 billion in overseas assets and is taking on a greater responsibility for maintaining exchange rate stability [1][2].

Core Viewpoint - The National Pension Service of South Korea will adopt a flexible approach to foreign exchange hedging in response to market conditions [1][5]. Group 1: Foreign Exchange Hedging Strategy - The fund's management committee has decided to implement flexible measures that allow for strategic hedging based on market conditions [1][5]. - The current hedging limit is set at 10% of overseas assets [2][6]. Group 2: Market Context - The decision is driven by a surge in domestic demand for US dollars, influenced by both the National Pension and retail investors' portfolios, amid a significant depreciation of the Korean won in the second half of the year [2][6]. - The Korean won has depreciated over 8% against the US dollar, making it the worst-performing currency in Asia during this period [3][7]. Group 3: Currency Swap Agreement - The Ministry of Health and Welfare, which oversees the National Pension, announced an extension of the foreign exchange swap agreement with the Bank of Korea for an additional year, until the end of 2026 [3][7]. - The swap limit has increased from $10 billion in 2022 to $65 billion [4][8]. - Following the announcement, the Korean won appreciated against the US dollar, with the exchange rate dropping by 1% to 1,463.65 won per dollar from around 1,472 won [4][8].

Core Viewpoint - The Governor of the Bank of Korea, Lee Chang-yong, stated that there have been no discussions regarding a currency swap with the Federal Reserve, as it is deemed unrelated to current issues [1] Group 1 - The Bank of Korea is not considering a currency swap with the Federal Reserve [1] - The decision reflects the Bank's assessment of the current economic situation [1]