The Korea Times close
National
  • Politics
  • Foreign Affairs
  • Multicultural Community
  • Defense
  • Environment & Animals
  • Law & Crime
  • Society
  • Health & Science
Business
  • Tech
  • Bio
  • Companies
Finance
  • Companies
  • Economy
  • Markets
  • Cryptocurrency
Opinion
  • Editorial
  • Columns
  • Thoughts of the Times
  • Cartoon
  • Today in History
  • Blogs
  • Tribune Service
  • Blondie & Garfield
  • Letter to President
  • Letter to the Editor
Lifestyle
  • Travel & Food
  • Trends
  • People & Events
  • Books
  • Around Town
  • Fortune Telling
Entertainment
& Arts
  • K-pop
  • Films
  • Shows & Dramas
  • Music
  • Theater & Others
Sports
World
  • SCMP
  • Asia
Video
  • Culture
  • People
  • News
Photos
  • Photo News
  • Darkroom
  • The Korea Times
  • search
  • Site Map
  • E-paper
  • Subscribe
  • Register
  • LogIn
search close
  • The Korea Times
  • search
  • Site Map
  • E-paper
  • Subscribe
  • Register
  • LogIn
search close
Finance
  • Companies
  • Economy
  • Markets
  • Cryptocurrency
Sun, August 14, 2022 | 02:52
Economy
Korea, US get closer to currency swap deal after summit
Posted : 2022-05-23 16:49
Updated : 2022-05-24 16:06
Print Preview
Font Size Up
Font Size Down
President Yoon Suk-yeol and U.S. President Joe Biden hold a joint press conference following their first summit at the presidential office in Yongsan District in central Seoul, Saturday. Yonhap
President Yoon Suk-yeol and U.S. President Joe Biden hold a joint press conference following their first summit at the presidential office in Yongsan District in central Seoul, Saturday. Yonhap

By Yi Whan-woo

The latest summit between the leaders of Korea and the United States has raised expectations that the two allies will soon sign a currency swap agreement, since they agreed to cooperate closely to develop the foreign exchange market, according to experts, Monday.

Such expectations stem from growing calls for the revival of the currency swap deal here amid a rapid depreciation of the Korean won against the U.S. dollar that is feared to accelerate an exodus of foreign capital.

The currency swap deal enables Seoul to borrow dollars in exchange for the Korean currency at a pre-agreed rate. It thereby eases worries over a possible foreign currency crunch that can worsen Korea's path to an economic recovery by destabilizing the stock market, jack up import prices and fan additional inflation.

President Yoon Suk-yeol and U.S. President Joe Biden said in a joint statement issued after their summit that they "recognize the need to consult closely on foreign exchange market developments."

The statement says the purpose of such consultation is "to promote sustainable growth and financial stability, including orderly and well-functioning foreign exchange markets."

But the statement does not specify how the cooperation will be carried out in the foreign exchange market. Accordingly, it remains uncertain if talks will begin to resume a currency swap agreement that expired in December of 2021.

Nevertheless, the fact that a commitment to cooperation was addressed by the two heads of states "sends a strong signal that a currency swap or equivalent measures can be implemented if the dollar gets too strong for the market to withstand," said Park Chong-hoon, the head of economic research at Standard Chartered Bank Korea.

"The joint statement certainly can help reduce volatility on the foreign exchange market," he added.

Jeong Young-sik, a senior research fellow at the Korea Institute for International Economic Policy (KIEP), said the summit "opened the doors wide for the two allies to cooperate concerning a won-dollar exchange."

The researcher added, "In that regard, the summit can be said to contribute to market stabilization and such a contribution will get bigger as the form of cooperation becomes apparent."

Park said the joint commitment of Yoon and Biden to cooperate on the foreign exchange front will "have little impact" on curbing the won-dollar exchange rate from rising above the psychologically-important 1,300 won level. The won-dollar exchange rate, which stayed below 1,200 won in late February, closed at 1,264.1 won Monday, down 4 won from the previous close.

Asked about the timing of talks for a possible currency swap, Park said, "It may only begin when Korea's foreign currency reserves fall to a level that requires intervention from the central bank."

The country's foreign currency reserves are still considered "sufficient," although they shrank for two consecutive months and stood at $449.3 billion in April, down $8.51 billion from March, according to Bank of Korea (BOK) data in early May.

Some financial sources say the BOK under the Yoon government may opt for a standing bilateral currency swap with the U.S. Federal Reserve.

The Fed only has standing liquidity swap lines in place with the central banks of Canada, the European Union, Japan, Switzerland and the United Kingdom.

The method has no limit on liquidity provisions and no expiration date, unlike the previous Korea-U.S. deals that last for a limited time with a cap on the amount of borrowing,

Expired in December 2021 under the previous Moon Jae-in administration, the last currency swap contract was worth $60 billion.


Emailyistory@koreatimes.co.kr Article ListMore articles by this reporter
 
LG
  • Seoul City to retrofit manholes to prevent fatal falls during floods
  • Ruling party politicians' visits to flood-damaged areas cause stir
  • Yoon pardons Samsung chief, other business tycoons to 'overcome economic crisis'
  • Korea lacks data to operate autonomous vehicles
  • Disney beats Netflix in streaming subscribers
  • Lotte Chilsung Beverage CEO's leadership questioned over numerous scandals
  • Star novelist's 'Harbin' on Korean independence fighter becomes bestseller
  • [Exclusive] KDB accelerates drive to set up new hub in EU
  • Why has Apple Pay been unavailable in Korea?
  • Hyundai to set up Robot AI research institute in US
  • Interactive News
  • With tough love,
  • 'Santa dogs' help rebuild burnt forests in Andong
  • 'Santa dogs' help rebuild burnt forests in Andong
  • A tale of natural wine
    • Death of young webtoon artist sparks controversy over harsh working conditions Death of young webtoon artist sparks controversy over harsh working conditions
    • 'Good Doctor' director to debut Netflix's high-strung suspense series, 'A Model Family' 'Good Doctor' director to debut Netflix's high-strung suspense series, 'A Model Family'
    • Musical 'Kinky Boots' tells people to love themselves as they are Musical 'Kinky Boots' tells people to love themselves as they are
    • Reality shows go abroad again amid eased COVID-19 travel restrictions Reality shows go abroad again amid eased COVID-19 travel restrictions
    • Crime thriller 'Limit' is about mother's quest to save abducted son Crime thriller 'Limit' is about mother's quest to save abducted son
    DARKROOM
    • Ice is melting, land is burning

      Ice is melting, land is burning

    • Tottenham 6-3 Team K League

      Tottenham 6-3 Team K League

    • Afghanistan earthquake killed more than 1,000

      Afghanistan earthquake killed more than 1,000

    • Divided America reacts to overturn of Roe vs. Wade

      Divided America reacts to overturn of Roe vs. Wade

    • Namaste: Yogis to celebrate International Yoga Day

      Namaste: Yogis to celebrate International Yoga Day

    The Korea Times
    CEO & Publisher : Oh Young-jin
    Digital News Email : webmaster@koreatimes.co.kr
    Tel : 02-724-2114
    Online newspaper registration No : 서울,아52844
    Date of registration : 2020.02.05
    Masthead : The Korea Times
    Copyright © koreatimes.co.kr. All rights reserved.
    • About Us
    • Introduction
    • History
    • Location
    • Media Kit
    • Contact Us
    • Products & Service
    • Subscribe
    • E-paper
    • Mobile Service
    • RSS Service
    • Content Sales
    • Policy
    • Privacy Statement
    • Terms of Service
    • 고충처리인
    • Youth Protection Policy
    • Code of Ethics
    • Copyright Policy
    • Family Site
    • Hankook Ilbo
    • Dongwha Group