South Korea's National Pension Service has removed the ceiling on its currency hedging, a policy shift that could bolster the won at a time of sustained weakness. The world's fourth-largest pension fund, managing $1.08 trillion, said in April that a 15% limit on forex hedging for foreign investments is now a baseline rather than a cap.

The timing matters. The won hit a 17-year low against the dollar on March 31, and the NPS holds roughly 886 trillion won in overseas assets—more than double Korea's official foreign exchange reserves of $423.7 billion. On a typical trading day, the fund ranks among Seoul's biggest currency traders, capable of moving the dollar-won rate several figures within minutes.

When NPS hedges, it promises to sell dollars to major Korean banks at a fixed future date. Those banks immediately dump dollars into the local market to prepare, increasing supply and strengthening the won. The fund deployed tactical hedging after former President Yoon's brief martial law declaration in December 2024, when the won plummeted, and again in December 2025 as the currency approached the psychologically critical 1,500 per dollar level. While the finance minister has said the government has no intention of using NPS to defend the won, the fund's sheer scale means any hedging activity will inevitably influence currency dynamics.