Seoul discussing USD-KRW stabilization arrangement ahead of summit with US

[Graphics by Song Ji-yoon]

The U.S. dollar shot up in Seoul despite the presidential office’s confirmation of discussions on measures to stabilize the Korean won against strengthening greenback during the upcoming summit talks with President Joe Biden.

“I cannot agree with the word 'swap’ when South Korean economic fundamentals are strong,”

said Kim Tae-hyo, first deputy chief of the Korean presidential National Security Office, Wednesday in a press briefing when asked if currency swap would be discussed during the summit meeting between Presidents Yoon Suk-yeol and Joe Biden on Saturday.

Kim pointed out the U.S. central bank usually seeks currency swaps with counterparts outside the internationally trading currencies of euro, yen, and the British pound, during financial crisis.

“We are addressing the issue in the context of stabilizing international finance, and financial and foreign exchange markets, and smoother and speedier cooperation between South Korea and the U.S.,” he said.

Politicians and market experts have been calling for a renewal in the currency swap with the U.S. to contain the slide of the won, hovering at its lowest since 2009 financial crisis.

South Korea and the U.S. operated a $60 billion currency swap from March 2020 to December 2021 amid pandemic-caused instability. Korean authorities can tap into the borrowed liquidity to smooth operations in the foreign exchange market in case of volatility.

The dollar has added 0.5 percent to 1,274.40 won as of 11:50 a.m. Thursday due to renewed foreign stock selloff following overnight hawkish comment from the U.S. Fed chief.

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