South Korea's National Pension Service (NPS) has suspended foreign exchange hedging operations, a market source told Reuters on Monday, as the won strengthened to a near two-year high.
The NPS, the world's third-largest public pension fund and a major player in domestic financial markets, had been conducting currency hedging operations flexibly this year with a hike in its hedging limit to help policymakers curb weakness in the won.
The pension fund's hedging operations effectively raise dollar supply in the onshore currency market.
"FX hedging by the NPS has been suspended. It seems there is dollar buying demand today," said the source, declining to be identified due to the sensitivity of the matter.
Another market source said the pension fund's dollar buying could be conducted via both regular and "market average rate" trading.
The NPS declined to comment on foreign exchange policies.
The move came as a sharp rebound in the won has raised worries about one-sided market volatility. Foreign exchange authorities recently bought about US$20 billion in dollars that chipmaker SK Hynix sold after its US share listing.
Earlier on Monday, the won strengthened as much as 1.15 percent to 1,334.7 per dollar to hit its highest since October 4, 2024, before cutting gains to 1,346.2 as of 0321 GMT.
The currency has strengthened 16 percent against the dollar so far this quarter, reversing its course after weakening for four straight quarters to 17-year lows.
The NPS held 1,865.6 trillion won (HK$10.9 trillion) of assets at the end of June, with overseas assets accounting for 54 percent of the total.
Reuters
