South Korea huge pension fund a local force driving won lower
South Korea’s strenuous attempts to defend a sharply weakening currency have run into an unstoppable home-made force working in the opposite direction: the national pension fund.
The National Pension Service (NPS), the world’s third-largest such fund, has a hefty and growing appetite for equity and bond investment abroad, which it can feed only by selling won for foreign currency.
It made net purchases of about $10 billion of foreign bonds and stocks in the first five months of 2022, central bank data shows. As a cause of won sales this year, its activity came on top of a record first-half trade deficit of $10.36 billion and the $12.53 billion that foreign investors had pulled from the country’s stock market by June.
All this downward pressure has made the won the worst performer against the U.S. dollar among currencies of emerging Asian economies this year. Its losses exceed 9%.
“Apart from global factors, such as high oil prices, for 90% of the time in recent weeks it was continued outflows by the NPS that took the won down,” said a foreign exchange dealer at a local bank.
Read more @Reuters
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