Seoul-Beijing Currency Swap Deal Imminent

South Korea is seeking a $10-30 billion currency swap deal with China as talks between the two nations are nearing an end, Yonhap News reported quoting government and central bank officials Tuesday.

Currently, the two countries have a currency swap contract under which South Korea is able to borrow up to $4 billion from China. The deal for an extended swap, if realized, would create an additional liquidity line for South Korea that has been struggling with depleting foreign currency reserves.

"Talks are now underway with China regarding a currency swap," a high-ranking government official told Yonhap News. "It will take some time, but (a deal) is not that far away."

Another official close to the matter said, "The swap deal with China will be around $10 billion to $30 billion, given a recent similar arrangement with the United States."

South Korea has been seeking extended currency swap deals with China and Japan as part of efforts to secure enough dollars to ride out the ongoing financial turbulence. Companies and banks are having difficulty servicing debts and paying for business activities.

On Thursday, the central Bank of Korea announced a $30 billion swap agreement with the U.S. Federal Reserve. It will accelerate the drive for similar deals with the two Asian countries, Finance Minister Kang Man-soo said.

South Korea's foreign reserves have been on a sharp decline as the government stepped up intervention to prop up the sliding won against the greenback. As of the end of October, the nation's foreign reserves amounted to $212.30 billion, down $27.40 billion from a month ago. China held $1.9 trillion at the end of September.

Talks with Japan are also underway, but "progress has not been made as much as in talks with China," a government source said. Currently, South Korea has a $13 billion currency swap deal with Japan.