Won-dollar Swap to Be Extended to Oct.
By Kim Jae-kyoung
Staff Reporter
The United States has agreed to extend a $30 billion won-dollar swap agreement with South Korea, originally set to expire on Apr. 30, until Oct. 30, in a move to stabilize the volatile currency market.
The Bank of Korea (BOK) announced Monday that it signed an agreement with its counterpart the U.S. Federal Reserve to extend the temporary currency swap contract signed in late October 2008.
On Oct. 30, the BOK inked a temporary reciprocal swap contract with the Federal Reserve in a bid to ease an acute shortage of dollars amid growing fears over another financial crisis.
``To address continued pressure in global U.S. dollar funding markets, the swap deal has been extended for an additional six months,'' said, Ahn Byung-chan, director general of the international department at the BOK.
``The extension will give more room for the central bank (in using foreign reserves), contributing to improving the foreign currency funding conditions and restoring stability to the local financial market that has recently shown signs of volatility,'' he added.
The local currency regained stability late last year thanks to the government's intervention but has since weakened sharply against the greenback. The won lost 130 won per dollar to close at 1,398.5 won Monday from the end of last year.
With the extension, the central bank will have access to U.S. dollar funds of up to $30 billion in exchange for Korean won until Oct. 30.
``Taking into account market conditions, the central bank will continue to provide U.S. dollar loans to local lenders through competitive auctions, using funds from the swap line,'' Ahn said.
``The BOK did not ask the Federal Reserves to increase the ceiling on the swap deal, believing that an increase may send a negative image to global investors,'' he added.
In the meantime, the U.S. extended its currency swap contract with 12 other countries, including Brazil, Mexico, Singapore, Australia, England and Switzerland.