BOK, NPS extend $65 billion FX swap to defend won

(Yonhap)

South Korea’s financial authorities have decided to extend a $65 billion foreign-exchange swap arrangement between the Bank of Korea (BOK) and the National Pension Service (NPS) as part of an all-out effort to stabilize the sharply weakening won. The government also issued a stern warning to major exporters, signaling that policy-fund support could be suspended if they continue to hoard dollars instead of selling them into the market.

According to the Ministry of Economy and Finance on Monday, Deputy Prime Minister and Finance Minister Koo Yun-cheol held an emergency meeting with BOK Governor Rhee Chang-yong and Financial Services Commission Chair Lee Eok-won to discuss measures to restore foreign-exchange stability.

Under the plan, the $65 billion currency-swap facility between the BOK and the NPS—originally launched in September 2022 at $10 billion and expanded to its current size in December 2024—will be renewed at the end of this month. The agreement allows the NPS to lend won to the central bank in exchange for dollars drawn from the nation’s foreign-exchange reserves.

Although the NPS has made limited use of the swap so far, officials say that the extension alone will help calm market sentiment and reinforce the government’s commitment to defending the won.

The finance ministry also renewed its warning to exporters, saying it will begin regular monitoring of foreign-exchange conversions and overseas investments by major companies. The ministry added that it is considering linking corporate support programs—such as policy financing and trade-promotion funds—to firms’ FX-management behavior to encourage more dollar sales in the domestic market.

Separately, the Financial Supervisory Service (FSS) has launched an inspection of securities firms that cater to individual investors—Korean individuals investing in overseas stocks—to assess whether they have adequately explained the risks of currency exposure and provided appropriate investor protection.

Industry analysts expect regulators to scrutinize whether brokerage houses and asset managers excessively pushed “FX-open” products, which leave investors exposed to exchange-rate volatility, rather than promoting hedged alternatives. Such products generate higher returns when the won weakens against the dollar, potentially amplifying currency instability.