Japan will likely extend its currency swap facility with South Korea, helping Seoul secure a tightened safety net for a possible financial crisis, Yonhap News Agency reported quoting a top South Korean financial policymaker Monday.
"We expect that the currency swap arrangement with Japan will be extended automatically if there are any particular problems," Deputy Finance Minister Shin Je-yoon was quoted as saying. "Of course, this is an issue to be decided by Japan's central bank but we believe things will be done in a good direction."
Shin didn't elaborate on its duration and size. He is currently in Thailand to accompany Finance Minister Yoon Jeung-hyun for a meeting with his counterparts from Southeast Asian countries along with Japan and China.
South Korea and Japan have a $20 won-yen currency swap pipeline. South Korea also has a 38 trillion won ($25.1 billion) three-year swap arrangement with China and it recently extended the $30 billion swap deal with the U.S. by six months until October.
On Sunday, finance chiefs of 10 ASEAN member countries plus South Korea, Japan and China agreed here to expand the size of their joint currency pool to $120 billion from an earlier-proposed $80 billion in a bid to better cope with a regional financial crisis.
The expansion is expected to give an additional currency supply line for South Korea whose currency is one of the worst-performing major currencies in the world, experts say.
With rumors circulating over a possible foreign capital exodus from local bond and stock markets, the won plunged to a three-month low against the U.S. dollar Friday.