BOK denies report on currency swap with U.S.

A foreign exchange dealer observes the monitor at a dealing room in Hana Bank in central Seoul on Wednesday. [YONHAP]

The Bank of Korea denied a local report about a currency swap arrangement between Korea and the United States.

A report from Yonhap Infomax said Wednesday that the Bank of Korea is negotiating a currency swap with the Fed, citing sources in the bank industry.

The currency swap amount was estimated at around $60 billion, and the presidential office and the finance ministry were actively pushing it, according to the report.

The Bank of Korea immediately denied the report, saying it was “different from the fact.” It did not provide any further details.

Calls for a currency swap have been growing to curb the depreciation of the won against the dollar.

As of Wednesday, the won has lost around 17 percent this year against the U.S. dollar. The won traded as low as 1,399 won per dollar on Sept. 16, the lowest level since March 2009.

The finance ministry has warned speculators about betting against the currency and said it will intervene in the market if necessary.

The decline in the won has affected many aspects of the economy, including the trade balance and inflation.

Choi Sang-mok, senior presidential secretary for economic affairs, told reporters Friday that a currency swap deal “is a topic of common interest,” and therefore “a discussion is expected to take place naturally.”

Korea and the United States signed a currency swap in March 2020 and it remained in place until last December. It was worth $60 billion. A new arrangement was a possible agenda item when U.S. President Joe Biden visited Korea in May, but the government said it was not the right time for such a deal as Korea's economic fundamentals were strong.

The idea was also expected to arise during U.S. Secretary of the Treasury Janet Yellen’s visit to Korea in July, but no deal took place.

Some analysts say a currency swap arrangement is not necessary at this point as Korea's foreign reserves are among the world's highest: $436.4 billion as of the end-August. As of the end of July, Korea's foreign reserves were world’s ninth-largest.

The won touched 1,396.60 won during trading Wednesday, down 0.51 percent from Tuesday.

BY JIN MIN-JI [jin.minji@joongang.co.kr]