SEOUL, April 12 (Korea Bizwire) – South Korea and China on Monday agreed to extend their currency swap deal scheduled to expire next year in a bid to better cope with possible fallout stemming from mounting financial market uncertainties and widely expected U.S. rate hikes.
South Korea’s Finance Minister Yoo Il-ho met with People’s Bank of China Gov. Zhou Xiaochuan to reach an agreement on the extension of the currency deal on the sidelines of an annual meeting of the Inter-American Development Bank (IDB) annual meeting in the Bahamas.
The Seoul-Beijing currency swap deal was first initiated in 2009 with a value of 32 trillion won (US$28 billion), and then raised to 64 trillion won in 2011. The 2011 agreement is set to end in October 2017.
The two countries will also begin official negotiations to expand the value, according to Seoul’s finance ministry.
A currency swap is an arrangement between two countries to exchange one currency with another at a specific rate of exchange in a bid to use the powerful foreign currency to soothe the volatility in the currency market.
It came less than two months after Yoo and Zhou agreed to start official discussions on the currency swap deal extension in February.
South Korea had once signed a currency swap deal with the U.S. in the midst of the 2008 global financial crisis, but has not engaged in talks on the issue since its expiration in 2010.
It also ended its similar $10-billion deal with Japan last year that had been maintained since 2001.’