Bank of Korea, U.S. Fed agree on currency swap
Oct 30, 2008
Source : Bank of Korea
Korea and the United States have signed a currency swap agreement. As a result, Korea will be able to secure supplies of up to US$30 billion from the United States in exchange for deposits in won.
The Bank of Korea signed an agreement on "temporary reciprocal currency arrangements" with the U.S. Federal Reserve Bank, the U.S. central bank, at 4:30 a.m. on Oct. 30 (Korea standard time).
Under the currency swap agreement, the BOK will deposit money in Korean won in the Federal Reserve Bank for a certain period of time and take out U.S. dollars. The BOK will withdraw the won after paying the dollars back upon maturity of the contract.
Besides Korea, the United States has also decided to establish reciprocal currency arrangements with Singapore, Mexico and Brazil. The number of partners that currently have currency swap agreements with the United States, therefore, has increased from 10 to 14, including the EU, the UK, Switzerland, Japan, Canada, Australia, Denmark, Norway, Sweden, and New Zealand. Korea is the first emerging economy to have signed such currency arrangements with the United States.
The latest currency swap agreement was aimed at improving the global financial market’s liquidity problems and helping those countries with solid economic fundamentals overcome difficulties in securing dollar liquidity.
Under the reciprocal currency arrangements with the U.S. Federal Reserve, the BOK will be able to secure supplies of up to $30 billion in exchange for deposits in won. The bilateral currency swap agreement will be effective until Apr. 30, 2009.
The BOK plans to supply the dollars, which it will secure through currency arrangements with the Federal Reserve, to foreign exchange banks in the country through a public bidding process.
The BOK said it will continue efforts to stabilize the financial market through cooperation with the central banks of major countries in the future.
By Chung Myung-je
Korea.net Chief Staff Writer
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