Home > Business > Finance

BOK renews currency swap contract with Indonesia as won wobbles

Published: 05 Feb. 2026, 14:00 Updated: 05 Feb. 2026, 19:11

JIN MIN-JI
[email protected]

Bank Indonesia Gov. Perry Warjiyo and Bank of Korea (BOK) Gov. Rhee Chang-yong shake hands at the BOK office in central Seoul on Feb. 5, as the two parties renewed the currency swap agreement. [BOK]

Bank of Korea (BOK) announced a renewal of a bilateral currency swap agreement with its Indonesian counterpart as stabilizing the exchange rate has become increasingly important amid the prolonged weakening of the won.

The arrangement would enable the two banks to exchange local currencies through March 2031, said the BOK on Thursday, providing a framework for the exchange of local currencies between the two central banks of up to 10.7 trillion won ($7.38 billion) or 115 trillion rupiah

The latest deal marks the fourth extension since the first agreement was reached in 2014.

“The arrangement aims to promote bilateral trade and strengthen financial cooperation between Korea and Indonesia,” said the BOK in a statement. “In particular, the arrangement also supports the settlement of trade transactions using local currencies of both countries, thereby contributing to regional financial stability.” BOK added, noting “close economic relationship” between the two countries.

A currency swap does not provide immediate liquidity, but serves as a key safety mechanism in times of volatility.

The swap agreement came at a precarious moment, as the won continues to struggle with chronic depreciation against the dollar.

An electronic board at Woori Bank in central Seoul shows the closing market indexes on Feb. 5. [YONHAP]

The local currency weakened by 18.8 won to close at 1,469.0 against the greenback as of 3:30 p.m. on Thursday, recovering from its relative strengthening entering February.

At one point last year, Korea proposed an unlimited currency swap with the United States in exchange for its pledge to form a $350 billion US investment fund, but the offer fell apart.

With Korea having pledged U.S. investment and the appointment of Federal Reserve chief Kevin Warsh, experts project that the won could further dip against the dollar. The country’s foreign reserves, however, have been on the decline over the past months.

The foreign exchange reserves fell for the second consecutive month in January, as the central bank tapped into its dollar holdings to defend the weakening won.

Korea’s foreign reserves stood at $425.91 billion at the end of January, down $2.15 billion from the previous month, according to data released by the BOK on Feb. 4. This follows a $2.6 billion decline in December, reversing a six-month streak of increases that had stretched from June to November last year. The central bank said the decline was due in part to a currency swap agreement with the National Pension Service and dollar supplies injected into the market to stabilize volatility.

BY PARK EUN-JEE, JIN MIN-JI [[email protected]]