The Bank of Korea announced on July 30 that it extended with the U.S. Federal Reserve Board a bilateral currency swap until March 31 next year. (Yonhap News)

By Xu Aiying and Lee Jihae

Korea and the U.S. have agreed to extend by six months a bilateral currency swap worth USD 60 billion.

The central Bank of Korea on July 30 said it agreed with the U.S. Federal Reserve Board to extend the swap through March 31 next year. The program would have expired on Sept. 30 otherwise.

Both sides agreed on the need for the extension due to lingering uncertainty over COVID-19 despite recent stability shown by the global dollar market and the Korean foreign exchange market.

A currency swap is a contract allowing two countries to exchange money in their respective currencies in an emergency such as a currency crisis.

The Fed in 2008 concluded swaps with the central banks of Korea and several other countries at the peak of the global financial crisis.

"The extension of the expiration of the Korea-U.S. currency swap will contribute to maintaining stability in the domestic foreign exchange and financial markets," the bank said. "The plan is to provide foreign currency loans if needed based on the direction of the domestic market for foreign currency funds."