The National Pension Service of South Korea has sold $1.2 billion in U.S. dollars to stabilize the won amid rising volatility. The move marks a significant shift in the fund's foreign exchange strategy and signals growing central bank coordination in defending the domestic currency.
- The National Pension Service sold $1.2 billion in U.S. dollars to support the won.
- The won depreciated 1.8% over 48 hours prior to the intervention.
- The NPS manages assets valued at approximately $1.3 trillion.
- This marks the first known direct currency intervention by the NPS in over ten years.
- The intervention led to a 0.9% rebound in the won against the dollar.
- The transaction was executed through the central bank’s foreign exchange coordination mechanism.
The National Pension Service (NPS) of South Korea executed a large-scale foreign exchange intervention on Tuesday, liquidating $1.2 billion in U.S. dollar assets to support the Korean won. The transaction occurred during early trading hours in Seoul and followed a sharp depreciation of the won, which had fallen more than 1.8% against the dollar over the prior 48 hours. This marks the first known direct currency intervention by the NPS in over a decade, reflecting heightened concerns over capital outflows and weakening investor confidence. The intervention comes amid broader macroeconomic pressures, including rising U.S. Treasury yields, a stronger dollar, and heightened geopolitical risks in Northeast Asia. The NPS, which manages assets worth approximately $1.3 trillion, has historically maintained a passive stance in currency markets. However, the recent volatility has prompted a strategic reassessment, with officials citing the need to protect long-term pension liabilities denominated in won. Market participants reacted swiftly, with the won rebounding by 0.9% against the dollar following the announcement. The Korea Exchange confirmed that the transaction was executed through the central bank’s foreign exchange intervention mechanism, which allows institutional investors to participate under coordinated supervision. Analysts estimate that the NPS’s move may have reduced foreign exchange exposure by roughly 3.5% in its portfolio, aligning more closely with domestic currency protection goals. The intervention underscores a growing trend of sovereign pension funds playing a more active role in macroeconomic stabilization. While the NPS has not disclosed its future strategy, market watchers anticipate potential follow-up actions if the won continues to weaken. The move also raises questions about the balance between financial neutrality and systemic intervention in times of market stress.