South Korea May Step Up Currency Defense Near 1,500 Level, Analysts Say

South Korea may step up its defense of the won should the currency weaken toward the psychologically important 1,500‑per‑dollar level, a threshold unseen since 2009, according to analysts.

The state-run National Pension Service, which has to support the won, is likely to become more active at about 1,480 to 1,500 won per dollar, said Minhyeok Lee , an economist at Kookmin Bank in Seoul. The won was trading at about 1,465 on Thursday.

South Korea is under pressure to defend the currency as persistent stock outflows and rising residents’ overseas investment sent the won tumbling more than 4% this quarter . The NPS, the nation’s largest institutional investor with about $545 billion of foreign assets, has often helped counter pressure on the won through hedging and foreign-exchange operations, such as when it sold dollars and bought the won from .

“The recent report on the NPS’s FX hedging appears to have had a signaling effect on the market,” said Ej Ethan Seo , head of global markets Korea at BNP Paribas SA in Seoul. “There is a prevailing view that the authorities would defend the 1,500 level.”

The NPS caps its hedging ratio at about 15% of its global assets, and executes this through various methods including selling dollar forwards. In its latest round of dollar sales, the fund conducted it under its “tactical hedging” program, which allows it to cover up to 5% of overseas assets.

Expectations are building for some year-end FX management by the authorities amid thin liquidity, said Gyeong-won Min , an economist at Woori Bank in Seoul.

“The fund’s hedging activity can carry some weight,” he said.