The National Pension Service said on the 14th that it decided to raise the currency hedging ratio for overseas investment asset from 10% to 15%. Currency hedging means fixing exchange rates in advance to guard against risks from exchange rate fluctuations. Raising the hedging ratio increases the supply of dollars in the foreign exchange market, helping defend against a fall in the won's value.
The National Pension Fund Management Committee said it held its third 2026 meeting at 3:30 p.m. on the day and deliberated and approved "measures to improve overseas investment," including raising the currency hedging ratio. The committee said, "Considering the recent increase in external uncertainty due to international developments, we decided to expand and adjust the National Pension Service's overseas investment currency hedging ratio to 15%."
If the National Pension Service buys dollar spot for hedging while selling dollar forward, banks buy it. Banks also sell dollar spot in the market by the amount of forward they purchased for hedging. In this way, compared with when the National Pension Service does not hedge, the supply of dollars in the market increases, exerting downward pressure on the won-dollar exchange rate.
After surpassing 1,530 won intraday following the Middle East crisis, the won-dollar exchange rate has recently slowed its rise somewhat but is still moving in the high-1,400-won range.
The committee said it plans to execute hedging flexibly and nimbly, taking market conditions into account. It added that it would also cooperate with the foreign exchange authorities in the hedging process, including using swaps.
The National Pension Service also decided to push to issue foreign-currency bonds, aiming for early next year. If the National Pension Service issues foreign-currency bonds to raise funds for overseas investments, the scale of selling won to buy dollars in the foreign exchange market will decrease somewhat. However, revising the National Pension Act is necessary to issue foreign-currency bonds. Under the National Pension Act, funds needed to operate the pension system must be raised only from four sources: pension insurance premiums, fund management revenue, reserves, and surplus on the settlement of account of the corporation's income and expenditure.