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South Korea Signs $30 Billion Currency Swap with U.S.

Korea Times, news report , Posted: Oct 31, 2008

LOS ANGELES -- The Federal Reserve announced Wednesday a "currency swap arrangement" of up to $30 billion each with South Korea, Mexico, Brazil and Singapore to help ease dollar funding for major emerging economies amid the global financial crisis, Korea Times reports. This means the United States Federal Reserve will ensure South Korea sufficient access to U.S. dollars if the country needs them. If banks in South Korea experience difficulties in obtaining U.S. dollar funding, they can turn to the South Korean central bank for assistance. In turn, the central bank can exchange Korean won for U.S. dollars directly with the Fed.

Washington maintains such arrangements with 10 of the world's major advanced economies; Australia, Canada, Denmark, England, the European Union, Japan, New Zealand, Norway, Sweden and Switzerland. South Korea's top financial authorities welcomed the deal, saying it will contribute much to stabilizing the local financial system. Despite ample foreign reserves of more than $240 billion, South Korea's currency has plummeted to a 10-year low against the U.S. dollar as foreign investors continued to pull a huge amount of money out of local stocks amid concerns that local banks may face difficulty repaying short-term foreign debts.


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