S. Korea, China raise won-yuan swap deal
Source: Agencies |
October 27, 2011, Thursday
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Print Edition
Print Edition
CHINA'S central bank says it has agreed with its South Korean counterpart to expand their currency swap deal as a backstop against global economic turmoil.
The People's Bank of China signed the agreement with the Bank of Korea in Seoul yesterday, doubling its yuan-won swap line from 180 billion yuan to 360 billion yuan for the next three years.
The announcement came as Chinese Vice Premier Le Keqiang met with South Korea's President Lee Myung-bak during a two-day trip to Seoul.
Swaps allow one central bank to borrow a currency from another, offering an equivalent amount of its own as collateral.
The agreement, together with a similar deal signed with Japan on October 19, offers South Korea protection from funding shocks as Europe's sovereign-debt crisis deepens and demand in South Korea's largest export markets slows. The won has weakened 7.1 percent against the dollar over the past three months, the second-worst performer in Asia.
The won fell 0.3 percent to 1,132.45 per dollar at the 3pm market close in Seoul before the announcement.
The two countries' central banks also agreed yesterday to discuss whether to make their holdings of reserve currencies available for the swap, the Bank of Korea said.
"Today's measure will help ease the negative impact of increased global financial uncertainties on our well-managed economies that have solid fundamentals, while contributing to the promotion of bilateral trade for our stable economic development," the Bank of Korea said.
There is "no change" in that South Korea doesn't need to use the currency swap lines with China and Japan now, Kim Jae Chun, deputy governor of the Bank of Korea, told reporters in Seoul yesterday.
South Korea may use the deal to buy Chinese government bonds in the "mid- and long-term" as China opens up its market, Kim said.
The People's Bank of China signed the agreement with the Bank of Korea in Seoul yesterday, doubling its yuan-won swap line from 180 billion yuan to 360 billion yuan for the next three years.
The announcement came as Chinese Vice Premier Le Keqiang met with South Korea's President Lee Myung-bak during a two-day trip to Seoul.
Swaps allow one central bank to borrow a currency from another, offering an equivalent amount of its own as collateral.
The agreement, together with a similar deal signed with Japan on October 19, offers South Korea protection from funding shocks as Europe's sovereign-debt crisis deepens and demand in South Korea's largest export markets slows. The won has weakened 7.1 percent against the dollar over the past three months, the second-worst performer in Asia.
The won fell 0.3 percent to 1,132.45 per dollar at the 3pm market close in Seoul before the announcement.
The two countries' central banks also agreed yesterday to discuss whether to make their holdings of reserve currencies available for the swap, the Bank of Korea said.
"Today's measure will help ease the negative impact of increased global financial uncertainties on our well-managed economies that have solid fundamentals, while contributing to the promotion of bilateral trade for our stable economic development," the Bank of Korea said.
There is "no change" in that South Korea doesn't need to use the currency swap lines with China and Japan now, Kim Jae Chun, deputy governor of the Bank of Korea, told reporters in Seoul yesterday.
South Korea may use the deal to buy Chinese government bonds in the "mid- and long-term" as China opens up its market, Kim said.
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