CALLS FOR CURRENCY SWAP DEAL WITH U.S.

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The won-dollar exchange rate has hit the highest level this year. Some are calling for a currency swap deal between Korea and the U.S. to stabilize the exchange rate. Attention is on the upcoming visit of U.S. Treasury Secretary Janet Yellen to Korea on July 19.

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The won-dollar exchange rate soared in the very first moments of the trading day. At one point it surpassed the 1,316 won, recording the highest level in 13 years. To keep the exchange rate under control, authorities are selling the greenback. In just one month, the nation's foreign currency reserves recorded the largest decrease in more than 13 years. Many are calling for a currency swap deal between Korea and the U.S. so Korea can get U.S. dollars in exchange for an equivalent amount of Korean won whenever needed.

[Soundbite] Sung Il-jong(PPP Policy Committee(July 12, KBS Radio)) : "When President Biden was visiting Korea, a currency swap meeting was held. The gov’t is handling the matter, but it's difficult to disclose the details now."

The financial market is keeping a close eye on the upcoming visit to Korea by U.S. Treasury Secretary Janet Yellen on July 19. Washington has requested a currency swap in return for a price cap on Russian oil. In the past, when the financial market was in the doldrums, the news of Korea-U.S. currency swaps helped stabilize the won-dollar exchange rate.

[Soundbite] Moon Jung-hee(KB Kookmin Bank) : "Just by mentioning the possibility of close collaboration or efforts on a currency swap could help stabilize the market."

However, the effect could fall below expectations, because the value of the euro and yen is also plunging despite currency swaps with the U.S. That's because the reason behind the soaring exchange rate lies not in domestic factors, but rather in the strong U.S. dollar.