Lee Ju-yeol: "Korea-US Currency Swap May Be Extended After 6 Months... Grateful for US Swift Response" (Update)

[Image source=Yonhap News]

[Asia Economy Reporters Eunbyeol Kim, Sehee Jang] Lee Ju-yeol, Governor of the Bank of Korea, stated on the 20th that the Korea-US currency swap agreement could be extended depending on future market conditions.

Governor Lee, speaking to reporters on his way to work that day, said, "The agreement states a minimum of six months, but after observing market conditions for six months, we will operate flexibly thereafter." He added, "Back in 2008, the Korea-US currency swap agreement lasted for one year and three months."

The recently announced Korea-US currency swap agreement is an agreement to 'enter into a contract' itself. Therefore, from now on, considering conditions and legal issues, the contract drafting will begin soon. Governor Lee said, "Since there is a precedent from 2008, the time required will be shorter than before."

Governor Lee explained that the US responded actively and promptly to this currency swap agreement. He said, "Ultimately, the most prominent phenomenon in the current international financial market is risk aversion sentiment. Since there is a shortage of dollars in the international market, the US, as the issuer of the key currency, judged that it was facing constraints and thus took action."

As dollar shortages and dollar value increases cause market instability in the global financial market, the function of the dollar as the key currency is being constrained. Financial market instability in one country keeps spreading to others, leading to international financial market instability. Therefore, the US decided that, as the key currency country, it must alleviate the dollar shortage. He emphasized, "Korea also needed dollar supply, and since the current domestic foreign exchange market instability is due to increased dollar demand, this will contribute to easing domestic foreign exchange market instability."

He described this case as a representative example of the leadership of the central bank of the key currency country and added, "I am very grateful for the swift decision-making of Jerome Powell, Chairman of the US Federal Reserve (Fed)."

Governor Lee said that during the G20 (Group of Twenty) Finance Ministers and Central Bank Governors meeting held last month in Riyadh, Saudi Arabia, he had a bilateral meeting with Chairman Powell and exchanged detailed views on the impact of the COVID-19 pandemic. He said, "We agreed to exchange opinions frequently on issues like Korea's market situation," adding, "We also had conversations during the Bank for International Settlements (BIS) conference call, and a relationship has been established where I can regularly exchange views with Chairman Powell."

Meanwhile, Governor Lee stated that, separate from the currency swap, Korea's current foreign exchange reserves are generally considered adequate based on several adequacy criteria. He also noted that the current bank capital situation is sound, but if any problems arise, appropriate measures will be taken accordingly.

This content was produced with the assistance of AI translation services.