[Asia Economy Reporter Hwang Junho] Interest in concluding a currency swap agreement to curb the soaring exchange rate has increased following U.S. President Joe Biden's visit to Korea. The securities industry believes that if a currency swap agreement is reached, foreign investors may return due to the strengthening of the won.
On the 21st, SK Securities researcher Ahn Young-jin stated, "Discussions on a currency swap with the U.S. are expected to take place, but there are differing opinions regarding its permanent establishment," adding, "Currently, the countries with permanent currency swap agreements with the U.S. are Canada, the United Kingdom,the Eurozone, Japan, and Switzerland?five countries (regions) in total?but it cannot be said that the U.S. side's practical need for permanent establishment is fully met."
However, he noted that if a currency swap is concluded, its effects would appear immediately. He explained, "In Korea's case, during the 2008 global financial crisis and the 2020 COVID-19 shock, currency swaps with defined periods and scales were concluded with the U.S., and upon conclusion, the won-dollar exchange rate, which was approaching 1,300 won, stabilized."
He continued, "Considering that the current exchange rate instability caused by the strong dollar is a problematic issue and that dollar supply and demand are not as before due to accumulating trade deficits, the currency swap agreement issue could have quite a positive effect on our market," adding, "While this alone cannot guarantee the stability of the won itself, it is expected to send a good signal effect to foreign investors in the stock market."
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