(Dec 9): South Korea’s National Pension Service has recently started selling US dollars to bolster the won, according to a person familiar with the matter, reviving earlier efforts to support the currency.
The NPS, which held about US$542 billion of foreign assets as of the end-September, started its sales as part of a tactical hedging strategy, the person said, asking not to be identified because the information is private.
The move comes as the won has slid nearly 8% in the second half of the year, making it Asia’s worst-performing currency amid concerns about capital outflows and trade uncertainty. NPS had conducted such strategic hedges between January and May this year.
The won rose sharply after the news, erasing an earlier loss of as much as 0.2% against the dollar.
A spokesperson for the National Pension Service declined to comment.
NPS’s maximum hedge ratio is around 15%, or roughly US$81.3 billion. The fund employs two hedging strategies, with its tactical FX hedge adjustable within a 5% range of its overseas portfolio — allowing for as much as US$27.1 billion in tactical positions.
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Traders expect the fund to initiate its hedging strategy when the won moves to an extreme level relative to its long-term average, estimated at around 1,475–1,485 per dollar. On Monday (Dec 8), the won closed at 1,469.40 per dollar.
Uploaded by Arion Yeow
