FX authorities, NPS consultative body a mechanism to ensure won’s stability, Finance Ministry says

Finance Minister Koo Yun-cheol speaks on Korea’s foreign exchange market at a press conference held at the government complex in Sejong on Wednesday. [MINISTRY OF ECONOMY AND FINANCE]

 
The new consultative body formed between foreign exchange (FX) authorities and the National Pension Service (NPS) is not a short-term measure to stabilize the won, but a mechanism to ensure stable pension payments without undermining profitability, said the Ministry of Economy and Finance on Wednesday.  
 
“The NPS plays the largest role in the foreign exchange market as a single entity,” said Finance Minister Koo Yun-cheol during a press conference held at the government complex in Sejong. “Because the fund’s returns are evaluated in won, stable conditions in the FX market significantly affect its profitability. If the share of overseas investments increases or decreases sharply in the short term, there is a risk of amplifying FX market volatility.”
 
To tame the weakening of the won, foreign exchange authorities formed a new consultative body with the National Pension Service (NPS) and held its first meeting on Monday. The body was formed to assess the impact of the NPS’s expanding overseas investments on the FX market and to strengthen coordination among the Ministry of Economy and Finance, the Ministry of Health and Welfare, Bank of Korea and the NPS. Of the roughly 1,322 trillion won ($905.8 million) the state-run pension fund manages, 44 percent is held in foreign assets.
 
Koo added that the government will take firm action if the foreign exchange (FX) volatility becomes excessively amplified.
 
“It’s true that structural foreign-exchange pressures are at work, making the won more sensitive than other currencies,” Koo added. “The government is closely monitoring speculative transactions and one-sided movement, and we will respond in accordance with the principle of taking firm action if volatility becomes excessively amplified.”  
 
The press conference was scheduled just a day prior as the won weakened in recent weeks, hitting 1,479.4 on Nov. 24. It strengthened to trade in the 1,450 won range on Wednesday.
 

BY JIN MIN-JI [[email protected]]