$60 Billion Korea-US Currency Swap Extended Until Year-End (Comprehensive)

[Image source=Yonhap News]

[Asia Economy Reporter Eunbyeol Kim] The $60 billion currency swap agreement between South Korea and the United States has been extended again until the end of this year.

On the 17th, the Bank of Korea announced that it had agreed with the U.S. Federal Reserve Board (Fed) to extend the current currency swap agreement's expiration date from September 30 of this year to December 31 of this year. The currency swap amount (limit) remains at $60 billion, and other conditions remain the same.

A currency swap is an agreement that allows a country to deposit its own currency with the counterparty and borrow the counterparty's currency or dollars in emergencies such as a foreign exchange crisis.

The Bank of Korea stated, "We believe this maturity extension measure will contribute to maintaining stability in the domestic foreign exchange and financial markets," adding, "If necessary, we plan to immediately utilize the currency swap funds."

On March 19 last year, amid market turmoil caused by the COVID-19 shock, the Fed signed a $60 billion currency swap agreement with the Bank of Korea. Starting from March 31 of the same month, the Bank of Korea utilized these currency swap funds through a competitive bidding method, executing foreign currency loans totaling $19.872 billion in six rounds. Subsequently, as the foreign exchange sector stabilized, the Bank of Korea fully repaid the currency swap funds on July 30 of the same year, leaving no outstanding supply balance currently.

At the time of the first currency swap agreement announcement, concerns about dollar funding eased, leading to a stock price rebound (7.4%) and a decline in the won-dollar exchange rate (-3.1%) on March 20, immediately after the announcement.

Since then, the central banks of South Korea and the U.S. extended the currency swap agreement maturity once from September 30 last year to March 31 this year on July 30 last year, followed by a six-month re-extension on December 17 last year, and agreed to extend it again on this day.