S. KOREA-U.S. SIGNS CURRENCY SWAP DEAL

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The financial market is in turmoil recently because of the economic impact of the coronavirus pandemic. However, there is good news. And as a mean to help stabilize Korea's foreign exchange market, the Bank of Korea and the U.S. Federal Reserve's Board of Governors have signed a currency swap deal. Here are the details

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The Bank of Korea and the U.S. Federal Reserve's Board of Governors have signed a bilateral currency swap deal worth 60 billion dollars. The deal will last six months and can be extended if necessary. The Bank of Korea says it hopes to supply the U.S. currency secured through currency swap right away, and that the deal is aimed at stabilizing the local foreign currency market, which has been struggling lately. The central banks of nine countries including South Korea, Denmark, Australia and Brazil have signed similar deals with the U.S. Federal Reserve. The dollar swap deal with the U.S. has a symbolic meaning. Currency swap deals act as psychological safety boards in foreign currency markets because the United States signs them only with nations that boast strong economic standing. When South Korea and the U.S. signed a currency swap deal in October 2008, during the global financial crisis, the foreign exchange rate recorded the largest drop ever - 177 won per dollar - in just one day, while stock prices posted an all-time increase of nearly 12 percent.

[Soundbite] SUNG TAE-YOON(PROF., YONSEI UNIVERSITY) : "The fact that the deal was signed with the U.S. is more meaningful than its scope and period. The currency swap deal signed between Korea and the U.S. back in 2008 during the global financial crisis also played a crucial role in stabilizing the foreign exchange market."

However, this time the positive effect of the deal could be limited, as the coronavirus pandemic is still raging in Europe and the United States. The latest deal brings the total amount of currency swap to at least 200 billion dollars. Given Korea's foreign exchange reserves of 400 billion dollars as of late February, the nation's foreign exchange emergency fund currently amounts to 600 billion dollars.