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Photo courtesy of Yonhap News |
[Alpha Biz= Kim Jisun] The Ministry of Economy and Finance (MOEF), together with the Ministry of Health and Welfare, the Bank of Korea, and the National Pension Service (NPS), has launched a four-party task force to address volatility in the foreign exchange market.
According to an MOEF statement released on the 24th, the task force held its first meeting to review the impact of NPS’s expanding overseas investments on FX market conditions. The group will explore measures that can balance the NPS’s long-term investment returns with overall market stability.
The move comes as the won-dollar exchange rate has surged in recent weeks, prompting the government to strengthen its policy response. Unlike previous verbal interventions led by currency authorities, the newly formed task force signals the government’s intent to take more coordinated and actionable steps to stabilize the market.
At the first meeting, participants discussed ways to mitigate negative FX supply-demand effects stemming from NPS’s large-scale overseas investments. One option under review is increasing dollar liquidity in the market by selling a portion of NPS’s dollar-denominated overseas assets. Another focus is whether the pension fund should expand its use of currency hedging to reduce volatility.
Deputy Prime Minister and Finance Minister Kyungho Koo noted earlier that “the outflow of capital for overseas investment is contributing to a shortage of dollars,” which in turn is pushing the exchange rate higher.
The won closed at 1,477.1 per dollar on the 24th, up 1.5 won from the previous session.
Market observers say that while mobilizing the NPS for FX stabilization could be effective in the short term, it also raises concerns about potential impacts on the fund’s long-term investment performance and the retirement assets of Korean citizens.
알파경제 Kim Jisun (stockmk2020@alphabiz.co.kr)
