Currency swap to circulate fresh dollars as soon as next week

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Currency swap to circulate fresh dollars as soon as next week

Bank of Korea plans to supply U.S. dollars to the domestic market as early as next week as part of the $60 billion currency swap arrangement made with the U.S. Federal Reserve last week.

The central bank said Wednesday that “without having major troubles” it expects to finalize negotiations with the United States this week.

“In 2008, we supplied $4 billion in the first round,” said Ryoo Sang-dai, deputy governor at the bank. “This time, we plan to inject a much larger amount of dollars in the first round. It is hard to lay out an exact number at the moment though.”

As fallout from the coronavirus pandemic has roiled markets in recent weeks, currency exchanges have been no exception. Korea was one of nine countries last week to sign a currency swap arrangement with the U.S. Fed to relieve a local dollar shortage.

The ongoing negotiation covers how many dollars would be distributed in the first round as well as in what method and at what rate.

When Korea signed its first currency swap with the United States in 2008, $4 billion of the total $30 billion deal had been distributed during the first round through bids. A total of 5 bids had been made to provide $16.4 billion in Korea.

At the time, the parties had initially agreed on a six-month swap line, but ultimately extended the life of the deal to 15 months. The won-to-dollar exchange rate when the deal was signed had soared to 1,468 won. By the end of the currency swap it had dropped back to 1,170 won.

Prior to the announcement, the Korean won-dollar exchange reached 1,285.70 won Thursday, the highest level since 2009.

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