World · Singapore Bureau
South Korea pension fund halts currency hedging amid won strength
South Korea's major pension fund has suspended foreign exchange hedging activities as the won surges to its strongest level in nearly two years, according to sources familiar with the matter.
LSN Singapore ·
The National Pension Service has paused its hedging operations in response to the won's appreciation, which has lifted the currency to levels not seen since early 2022. The decision reflects the fund's assessment that current market conditions make active currency protection less necessary at present.
The won's recent strength comes amid shifting dynamics in Asian currency markets, driven by a combination of factors including interest rate differentials and broader economic flows. For pension funds with significant overseas investments, currency movements can materially affect returns, making hedging strategies an important consideration in portfolio management.
The suspension of hedging by one of South Korea's largest institutional investors signals confidence that the won's current valuation may limit further significant appreciation in the near term. The fund manages assets of several trillion won and maintains substantial international equity and fixed income holdings.
The move underscores how currency strength can influence investment strategy among major Asian pension funds, which continuously reassess their exposure to foreign exchange fluctuations based on market conditions and economic outlooks. As the won remains elevated, the fund's decision may influence broader market sentiment regarding future currency movements in the region.