S. Korea and Switzerland agree to forge currency swap deal

Lim Chang-won Reporter Posted : 2018-02-09 16:48 Updated : 2018-02-13 15:50
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[Yonhap Photo]

SEOUL, Feb. 09 (Aju News) -- The central banks of South Korea and Canada reached agreement Friday on a three-year currency swap deal worth 10.6 billion US dollars that would help the two countries strengthen a financial safety net ahead of a U.S. rate hike, bank officials said.

The Bank of Korea said the deal would be signed in Zurich on February 20. A currency swap is a tool for defending against financial turmoil by allowing a country beset by a liquidity crunch to borrow money from others with its own currency.

The agreement came amid growing market jitters caused by losses on Wall Street. On Friday, the benchmark Korea Composite Stock Price Index fell 1.82 percent to 2,363.77 on selling by foreign investors, and the local currency closed at 1,092.10 won against the dollar.

South Korea's foreign exchange reserves hit a record high of $395.75 billion at the end of January. Central bank officials said that the dollar's continued depreciation increased the value of non-dollar currencies when converted into the greenback. Holdings in gold bullion remained unchanged at $4.79 billion.

In October last year, South Korea and China agreed to extend a currency swap deal worth 56 billion US dollars for three years. The deal, forged in 2009, has served as a safety net for an emergency because South Korean and Chinese central banks can use each other's currency to ride out a financial crisis.

A month later, the central banks of South Korea and Canada signed the agreement without stipulating any ceilings. Canada has the world's fifth largest foreign currency reserve and maintains currency swap arrangements with the United States and other big countries.