SEOUL: South Korea’s central bank and national pension fund are in discussions to expand their foreign exchange swap programme of $35 billion, foreign exchange authority officials said on Friday.

They are in talks to raise the amount, but nothing has been decided, one official said.

Another official said discussions have been ongoing since the won was weakening a month ago to prepare a measure needed for market stabilisation.

The Bank of Korea said last December there remained a need to have a market stabilising tool in hand and that it would consider increasing the amount of the swap line if necessary, as it agreed with the National Pension Service (NPS) to extend the programme until the end of this year.

The NPS and the welfare ministry, which oversees the NPS’s investment policy, did not have immediate comment.

The swap line was first introduced in late 2022 and expanded in early 2023 to mitigate downward pressure on the won due to the NPS’ growing demand for overseas investments.

South Korea holds interest rates steady, as widely expected

It allowed the pension fund to borrow the central bank’s foreign exchange reserves instead of buying dollars in the onshore currency market.

In April, the won touched 1,400 per dollar, a 17-month low, as the US dollar strengthened. It has weakened 6.7% against the dollar so far this year, extending losses for a fourth consecutive year.