Amid instability in the foreign exchange market, including a recent rise in the won-dollar exchange rate, the National Pension Service will extend its strategic currency hedging period by 1 year through the end of 2026.

During its seventh meeting of the year at the government complex in Seoul on Monday, the National Pension Fund Management Committee approved an extension of the temporary strategic currency hedging period for the national pension fund, along with a plan to set a target excess return rate, or the rate it must achieve over its benchmark return.

Following the decision, the National Pension Service plans to extend its foreign exchange swap agreement with the Bank of Korea through the same period.

The committee decided to extend the temporary strategic currency hedging period through the end of next year, citing continued elevated exchange rate levels.

The committee previously extended the temporary strategic currency hedging plan through this year to mitigate foreign exchange losses following sharp exchange rate volatility in December 2024.

The committee also decided to prepare a flexible execution plan to enable strategic currency hedging to respond more nimbly to market conditions. The committee also approved a cumulative excess return target of zero-point-248 percentage points for the five-year period from 2022 to 2026.

The meeting also discussed joint research by a four-party consultative body comprising the Ministry of Health and Welfare, the Ministry of Economy and Finance, the National Pension Service and the Bank of Korea.

The committee said it will receive reports on future progress and will require deliberation and committee approval before moving forward with major policies.