Korea Urged to Forge Currency-Swap Deals with U.S., Japan
18 March, 2020
The coronavirus epidemic has raised fears that Korea has neglected currency-swap agreements with other countries that could let it raise cash easier in a crisis.
Korea has allowed a currency-swap manage Japan and the U.S. to lapse, though similar agreements are set up with some other countries like Australia, Canada, China, Indonesia and Malaysia.
Chung Duck-koo, a ex - minister of commerce and sector, said "We won't observe an immediate exodus of overseas capital, since the U.S. possesses drastically slashed interest rates, but if the coronavirus epidemic spreads further and China's economy may make a soft landing, Korea could suffer a significant crisis."
"If that happens, we're able to see an exodus of international capital, so we must hurry to forge the biggest possible currency-swap arrangement with the U.S.," he added.
Korea signed a good US$30 billion currency-swap agreement with the U.S. in October of 2008, when the gained weakened to W1,500 against the dollar and fears of a financial meltdown escalated. But the agreement expired in February 2010 and was not renewed.
The currency-swap agreement with Japan lapsed in 2015.
The Wall Road Journal recently urged the Fed to forge currency-swap deals to maintain financial market stability.
"The non permanent swap lines instituted between your Fed and the central banks Brazil and Korea in 2008 could possibly be restarted, and widened to add many different nations... It could extend these swap lines abroad with marketplaces in tumult like Australia, [Korea], China, Taiwan and Hong Kong," it wrote.
The linder of Korea on Tuesday declined to respond right to calls for more such deals but said it is intent on "bolstering financial safety nets."
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