Korea is under pressure to defend its currency after persistent stock outflows and overseas investment sent the won tumbling more than 8% against the dollar in the current half year, making it Asia’s worst performer. In the country’s latest move, Korea’s state-run pension fund signalled it will take a larger role in ensuring currency stability by becoming more flexible with hedging.
“There are NPS hedging flows waiting above 1,480 and the authorities are on alert, so there shouldn’t be a gap in dollar-selling supply,” according to Gyeong-Won Min, an economist at Woori Bank, referring to the National Pension Service.
“The key is whether the NPS will actively sell dollars, how far the authorities will go with actual intervention and whether year-end conversion flows from exporters will materialise,” he added.
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Despite gains in the country’s stock benchmark Kospi Index on Wednesday, foreign investors extended their selling into a third straight day. They have offloaded another US$190 million of local equities so far in the current trading session, exchange data show.
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