Korea-US Extend $60 Billion Currency Swap for 6 Months

Extension of Expiration Period by 6 Months Until March 31, 2021
"Continued Uncertainty of COVID-19 Necessitates Extension of Currency Swap"

[Image source=Yonhap News]

[Asia Economy Reporter Eunbyeol Kim] The Bank of Korea has decided to extend the currency swap agreement with the United States, which was signed in March, by an additional six months. Although the domestic foreign exchange market has shown signs of stabilization compared to the early stages of the COVID-19 outbreak, uncertainties related to the pandemic still persist, leading to the decision to extend the Korea-US currency swap.

The Bank of Korea announced on the 30th at 3 a.m. (2 p.m. on the 29th Eastern Time, U.S.) that it would extend the expiration date of the Korea-US currency swap agreement worth $60 billion by six months. Accordingly, the original expiration date of September 30 this year has been postponed to March 31 next year.

A Bank of Korea official stated, "Although the dollar market and the domestic foreign exchange market have recently shown signs of stability, uncertainties due to COVID-19 still continue," adding, "The scale and conditions of the currency swap remain the same as before, and only the contract period has been extended by six months."

He added, "We expect that the extension of the Korea-US currency swap will contribute to maintaining stability in the domestic foreign exchange and financial markets."

The effects of the Korea-US currency swap were also demonstrated when it was signed in March. In fact, just announcing the signing of the Korea-US currency swap agreement on the night of March 19 eased concerns about dollar funding.

At that time, as COVID-19 became a pandemic spreading to the U.S. and Europe in early March, the domestic stock market rebounded and the won-dollar exchange rate fell, causing the financial market to immediately recover. However, as soon as news of the Korea-US currency swap agreement was announced, the KOSPI index rose by 7.4%, and the won-dollar exchange rate fell by 3.1%.

Ten days after signing the Korea-US currency swap, the Bank of Korea announced plans and schedules for foreign currency loans through a competitive bidding method using the swap funds with the U.S. Federal Reserve (Fed) and supplied funds. From March 31, a total of $19.872 billion was supplied over six rounds. After the Korea-US currency swap funds were supplied, exchange rate volatility decreased, and domestic foreign currency liquidity conditions improved, leading to a rapid stabilization of the domestic foreign exchange sector.

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