National Pension raises short-term foreign currency limit to $3 billion (comprehensive)

National Pension raises short-term foreign currency limit to $3 billion (comprehensive)
National Pension raises short-term foreign currency limit to $3 billion (comprehensive)

National Pension

[국민연금 제공]


Funds required for overseas investment, advance procurement through the foreign exchange market

(Seoul = Yonhap Infomax) Reporter Myung-seop Byun = The National Pension Service has decided to raise the limit of short-term foreign currency funds to $3 billion and promote a foreign exchange swap transaction with the Bank of Korea within $10 billion by the end of this year.

The National Pension Fund Management Committee held its 5th meeting for 2022 on the 23rd and deliberated and decided on these details.

As agenda items, the Fund Committee proposed and discussed details such as the promotion of a foreign exchange swap between the National Pension Service and the BOK, a plan to advance foreign currency procurement, and an increase in the limit of short-term funds in foreign currency.

The National Pension Service (NPS) is promoting a foreign exchange swap transaction to raise dollars through the Bank of Korea within the limit of $10 billion by the end of this year.

The National Pension Fund raises dollars through the Bank of Korea when there is a demand for foreign exchange, and the maturity of each case is set at 6 or 12 months.

As it is longer than the maturity of foreign exchange swaps at commercial banks, the National Pension Service is expected to reduce transaction risks and costs.

In particular, it is expected to contribute to the stabilization of supply and demand in the foreign exchange market as it is possible to procure foreign exchange without going through the market in case of a lack of dollar liquidity as in recent times.

In addition, a plan to raise funds necessary for overseas investment in advance through the foreign exchange market (pre-procurement) was also reported to the Fund.

Until now, advance procurement was not allowed, so there was a difficulty in intensively purchasing foreign exchange when investing abroad.

In the future, it is expected that the NPS will be able to reduce the cost of foreign currency procurement by diversifying the funds required for overseas investment in the foreign exchange market and purchasing it in advance, as it will be possible to finance it within the limit of $1 billion per month in the future.

In addition, the National Pension Service deliberated and voted on the ‘Revision of the National Pension Fund Management Guidelines’, which raises the limit of short-term foreign currency funds to USD 3 billion (average daily balance for each quarter).

Short-term foreign currency funds are cash equivalents that are temporarily held to raise funds for overseas investment, and are currently managed within $600 million.

According to the National Pension Service, if foreign currency assets exceeding this limit are recovered, dollars must be converted into Korean Won and converted back into dollars when reinvested.

Considering the size of overseas investment (about $330 billion), the current limit is too low, and unnecessary foreign exchange transactions occurred frequently.

The National Pension Service predicted, “The increase in foreign currency short-term funds will reduce unnecessary currency exchange costs and alleviate the impact on the foreign exchange market caused by the recovery of large-scale overseas assets.”

He added, “Considering the opportunity cost of short-term funds, we will minimize the actual size of short-term funds in foreign currency.”

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This article was served at 16:16, two hours earlier on the Infomax financial information terminal.

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The article is in Korean

Tags: National Pension raises shortterm foreign currency limit billion comprehensive

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