Seoul: Foreign exchange authorities have launched a new consultative body in collaboration with the National Pension Service (NPS) to develop strategies for stabilizing the foreign exchange market, as the South Korean won continues its decline against the U.S. dollar. The finance ministry announced that the group held its inaugural meeting on Monday.
According to Yonhap News Agency, the meeting included representatives from the Ministry of Economy and Finance, the Ministry of Health and Welfare, and the Bank of Korea, in addition to officials from the NPS. The primary goal of this new body is to evaluate the impact of the NPS's increasing overseas investments on the foreign exchange market and to enhance cooperation among the four organizations involved.
The finance ministry explained that the consultative group aims to maintain a balanced approach that safeguards the NPS's investment returns while ensuring stability within the foreign exchange market. This initiative follows concerns voiced by Health Minister Jeong Eun-kyeong during a separate meeting on the NPS's investment policies. Minister Jeong noted that rising volatility in the foreign exchange market could adversely affect the NPS's investment outcomes.
The health ministry, which supervises the investment strategies of the NPS, the world's third-largest pension fund, has acknowledged that the fund's expanding overseas portfolio is a contributing factor to the weakening local currency. In response to these challenges, Minister Jeong emphasized the need for timely and precise actions based on comprehensive market analysis to protect the NPS's returns and long-term stability.
Market observers suggest that the discussions may explore encouraging the NPS to adopt more active currency-hedging strategies. Such strategies could involve the NPS selling portions of its dollar-denominated overseas assets during periods of significant weakening of the won.
Previously, the government declared its intention to work on foreign exchange market stabilization measures in collaboration with key market participants, including the NPS and major exporters. The South Korean won faced further pressure on Monday, reaching a seven-month low against the U.S. dollar and nearing its weakest level in 16 years, largely due to foreign investors' stock sell-offs.