South Korea's net forward dollar-buying position fell $2.38 billion to $13.46 billion at the end of September from $15.84 billion in August, according to data reported to the International Monetary Fund (IMF).
The decline was concentrated in contracts with remaining maturities of one to three months, where net long positions fell $2.73 billion to $3.77 billion.
Positions maturing in three months to one year declined $218 million to $4.89 billion, while those due within one month increased $565 million to $4.80 billion.
The turn came three months after the won slid to near 1,560 per dollar in June, its weakest since March 2009, and officials pressed exporters including Samsung Electronics and SK hynix to convert overseas earnings faster.
By September, semiconductor export receipts had flooded the market, and the currency averaged about 1,360 per dollar.
The inflows changed the job of the forward book. The position grows when authorities hand out dollars now and agree to take them back later, a tool Seoul used through the summer to keep dollar shortages from feeding the won’s slide. A stronger won means less need for that support.
The National Pension Service (NPS) is the likeliest place to look. The fund was reported to have suspended currency hedging in early September after the won’s sharp gains, though NPS officials told AJP at the time that the fund does not disclose its foreign exchange operations and declined to confirm the reports.
In April, the National Pension Fund Management Committee raised the baseline hedging ratio for overseas investments to 15 percent, with room to adjust depending on market conditions, and agreed to keep using foreign exchange swaps with the currency authorities.
Under those swaps, the Bank of Korea (BOK) supplies dollars to the pension fund upfront and gets them back when the contracts mature, which adds to the authorities’ forward position. When the fund makes fewer new swaps, or lets old ones expire without rolling them over, the position shrinks.
The IMF figures also capture other forward deals and maturing contracts, though, so they can’t show how much of September’s drop came from the pension fund stepping back.
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