South Korea's foreign exchange authorities have begun discussions to extend their currency-swap arrangement with the state pension operator amid the weakening Korean won. The deal, set to expire at the end of this year, allows the NPS to borrow up to $65 billion from the Bank of Korea's reserves. Officials are also reviewing measures to address FX market imbalances.
On December 1, 2025, South Korea's foreign currency (FX) authorities announced they have begun discussions to extend their currency-swap arrangement with the National Pension Service (NPS), the finance ministry said. Amid the ongoing weakening of the Korean won against the U.S. dollar, the Ministry of Economy and Finance, Bank of Korea (BOK), NPS, and Ministry of Health and Welfare formed a joint consultative body last month. The latest meeting of this four-way group, held on Sunday (November 30), initiated detailed talks on extending the swap contract, which expires at the end of this year.
Under the agreement, the NPS can borrow up to $65 billion from the BOK's foreign reserves in exchange for its local-currency holdings. The deal was first established in September 2022 with an initial limit of $10 billion, expanded to $50 billion in June 2024, and further to $65 billion in December 2024.
Officials at Sunday's meeting stated they would implement various measures to address imbalances in the FX market's supply and demand structure. The government plans to regularly review FX transactions and overseas investment activities by exporters, providing policy support as needed. Discussions also include inspections of investor-protection practices for overseas investment products at securities firms and other financial institutions.
Following the body's formation, market observers noted that talks might review the NPS's strategic currency-hedging program, given speculations about using the fund's growing overseas portfolio to defend the depreciating won. The NPS, the world's third-largest pension fund, is allowed to hedge up to 10 percent of its overseas assets when the FX rate exceeds its long-term average for a certain period. Finance Minister Koo Yun-cheol emphasized that the discussions are not meant as a temporary measure to mobilize the pension fund against the won's depreciation.
