The Bank of Korea and National Pension Service to Pursue Currency Swap for the First Time in 14 Years

[Image source=Yonhap News]

[Asia Economy Reporter Seo So-jeong] As the won-dollar exchange rate soars close to 1,400 won, the Bank of Korea and the National Pension Service are set to pursue a currency swap for the first time in 14 years.

On the 21st, according to the Bank of Korea and the National Pension Service, the Bank of Korea is pushing forward with a currency swap agreement in which the National Pension Service borrows dollars needed for overseas investment from the Bank of Korea and, in return, lends won to the Bank of Korea.

A Bank of Korea official stated in a phone interview with Asia Economy, "The government, the Bank of Korea, and related agencies are all exploring various measures to stabilize foreign exchange supply and demand." Both institutions are proceeding with internal procedures for the agreement, and the timing of the contract will be determined considering the foreign exchange market situation.

Once the currency swap contract is concluded, the National Pension Service will provide won to the Bank of Korea, and the Bank of Korea will provide dollars from its foreign exchange reserves to the pension fund. This will enable the pension fund to invest overseas using the dollars from foreign exchange reserves without exchanging currency in the foreign exchange market.

If the two institutions sign the currency swap agreement this time, it will be the first currency swap concluded in 14 years. The Bank of Korea and the National Pension Service signed a currency swap agreement worth $17.7 billion in 2005. However, the agreement ended when the Bank of Korea requested termination due to a shortage of foreign exchange amid the 2008 financial crisis.

This content was produced with the assistance of AI translation services.