Seoul, Dec 15 (IANS) Foreign exchange authorities have agreed with the state pension operator to extend their $65 billion currency swap deal by one year, the central bank here said on Monday.

The finance ministry and the Bank of Korea (BOK) have agreed with the National Pension Service (NPS) to extend their foreign exchange swap arrangement, with a limit of $65 billion, through the end of 2026, according to the BOK.

The deal had been due to expire at the end of this year, reports Yonhap news agency.

The swap deal was first established in September 2022 with an initial limit of $10 billion. Since then, the limit has been increased to $35 billion in April 2023, $50 billion in June 2024 and further to $65 billion in December 2024.

“The agreement is expected to contribute to stabilizing the foreign exchange market by absorbing the NPS’ demand for spot dollar purchases during periods of market volatility,” the BOK said in a release.

Hedging foreign assets through swap transactions “would help the NPS mitigate exchange rate volatility risks associated with its overseas investments and support fund returns,” the BOK added.

The extension comes as the local currency has weakened markedly against the U.S. dollar in recent weeks, hovering below the closely watched level of 1,450 won per dollar, prompting authorities to deploy various policy tools to safeguard financial stability.

On Monday, the local currency was quoted at 1,471.0 won against the greenback at 3:30 p.m., up 2.7 won from the previous session’s close.

Policymakers have said the won’s decline was driven largely by increased U.S. stock investments by local individuals and the NPS, as well as profit-taking by offshore investors following strong gains in the domestic market.

Last month, the finance ministry, the BOK, the NPS, and the health and welfare ministry overseeing the pension fund formed a four-way consultation body on foreign exchange issues.

–IANS

na/