By Choonsik Yoo and Yena Park
SEOUL (Reuters) – South Korea’s central bank and national pension fund are close to a deal that would allow the fund to secure dollars for its overseas investment without pressuring the already struggling won, sources said on Thursday.
The move comes after the won lost more than 8% to the dollar in just two months, hit by a ballooning trade deficit and a fresh wave of risk aversion in global markets.
“The discussion is in its final stage, and the timing of the announcement depends on the situation,” one source said, adding it could be announced this week.
In early March, Finance Minister Choo Kyung-ho told reporters the Bank of Korea and the National Pension Service could establish a swap agreement, under which the pension service could secure dollars outside the market.
The two agencies formed a swap programme late last year for a maximum of $10 billion but the deal was allowed to expire at the end of the year as the foreign exchange market stabilised.
The world’s third-largest pension fund, valued at 917 trillion won ($692.40 billion) at the end of January, needs to exchange around $1 billion of local currency into dollars each month for investment abroad. ($1 = 1,324.3700 won)
(Reporting by Choonsik Yoo and Yena Park; Editing by Sandra Maler, Muralikumar Anantharaman abd Sam Holmes)