South Korea Leans on Its Pension Fund Again to Steady the Won

South Korea is once again turning to the National Pension Service to take some pressure off the won...

Written by: Sophia Cruz • Tuesday, March 24, 2026 • 2 min read

• Last updated: Tuesday, March 24, 2026

Quick overview

South Korea is utilizing the National Pension Service for strategic currency hedging to alleviate pressure on the won, which is at its weakest against the dollar in 15 years.
The NPS, managing nearly a trillion dollars in assets, has a significant impact on currency markets when it engages in hedging activities.
Authorities are adapting the hedging framework to allow more flexibility, enabling the NPS to respond more quickly to market conditions.
Concerns remain about the sustainability of using a pension fund as a currency buffer amid ongoing structural pressures for dollar demand in Korea.

South Korea is once again turning to the National Pension Service to take some pressure off the won. Sources familiar with the matter say the fund has been carrying out strategic currency hedging, a move that speaks to how much the currency has struggled lately and how limited the government’s toolkit has become. The won has not been this weak against the dollar in roughly 15 years, and conventional intervention has only gone so far.

The NPS is not a small player in this. The fund manages close to a trillion dollars in assets, with overseas holdings accounting for the majority of that. That scale means its currency activity moves markets in a way most institutions simply cannot. When the fund sells dollars as part of its hedging program, the impact on the onshore won market is immediate and visible, which is precisely why Seoul keeps reaching for it when the currency comes under pressure.

What is different about the current approach is the deliberate loosening of how the hedging gets executed. The fund previously operated under a fairly rigid framework, with caps on how much of its foreign currency exposure could be hedged at any one time. Authorities have since signaled that those constraints will be applied more adaptively, giving the NPS room to move faster and at different thresholds depending on market conditions. The Bank of Korea also renewed its dollar swap line with the fund, a $65 billion arrangement that allows the NPS to source dollars directly from the central bank rather than buying them in the spot market.

Citigroup analysts put the dollar-won stabilization range at around 1,470 to 1,475, roughly where the hedging activity tends to kick in under the current setup.

For foreign investors, the broader question is sustainability. Using a pension fund as a currency buffer works until it doesn’t, and the structural pressures driving dollar demand in Korea, outflows from equities and ongoing overseas portfolio investment, have not gone away.

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ABOUT THE AUTHOR See More

Sophia Cruz

Financial Writer - Asian & European Desks

Sophia is an experienced writer, reporter and newsdesk member, mostly on the financial sectors. For the past 5 years Sophia has covered a wide variety of topics such as the financial markets, economics, technology, fin-tech and trading. Sophia has been a part of the FX Leaders team since 2017 and works on producing valuable content and information for traders of all levels of experience.