South Korea accelerates its pension fund strategies to manage currency volatility

South Korea’s government has announced significant intentions in the pension and financial policy sectors. According to statements from Lee Seuran, the First Vice Minister of Health and Welfare, the National Pension Service (NPS) will issue foreign currency-denominated bonds during the current fiscal year. This move represents a strategic shift in how one of the world’s largest pension funds manages its resources.

Market Drivers Behind the NPS Decision

The decision is rooted in the persistent weakness of the Korean won against the US dollar. From mid-2025 to February 2026, the national currency depreciated by approximately 7% against the US dollar, creating substantial pressure on the NPS’s currency exposure management. The pension fund responded to exchange rate fluctuations by selling dollars in the forward currency markets, in an attempt to support the won and stabilize exchange rates in the currency market.

This volatility has further complicated South Korea’s strategic plan to invest $350 billion in US industries, part of a trade agreement negotiated with Washington. Concerns about additional capital outflows, which could further devalue the won, have necessitated reconsideration of traditional financing approaches.

A Coordinated Framework to Address Financial Challenges

To address market stability issues in a coordinated manner, the Ministry of Health and Welfare, the pension fund, the Ministry of Finance, and the Bank of Korea will engage in structured formal consultations. This quadrilateral coordination body represents the first systematic effort to jointly manage currency volatility and financial system stability issues in South Korea.

The issuance of foreign currency bonds aims to diversify funding sources and reduce exchange rate risk exposure. The move highlights how major global financial actors are adapting their strategies in response to fluctuations in the global currency markets.