ID :
27672
Fri, 10/31/2008 - 10:12
Auther :
Shortlink :
https://www.oananews.org//node/27672
The shortlink copeid
(EDITORIAL from the Korea Times on Oct. 31)
Currency swap
The local financial markets welcomed a currency swap agreement between South Korea and the United States with share prices and the local currency rebounding Thursday.
It was good news that the U.S. Federal Reserve decided to sign a won-dollar swap
deal of up to $30 billion with the Bank of Korea (BOK). The Fed also unveiled a
similar accord with the central banks of Mexico, Brazil and Singapore.
Undoubtedly, the deal will have a symbolic and psychological effect on South
Korea. It is expected to stabilize the volatile won-dollar exchange rate and
shore up the Seoul stock market.
The benchmark KOSPI share price index reclaimed the psychologically important
1,000-point mark, closing 11.9 percent higher at 1,084.72. The local currency
also jumped 12.4 percent to 1,250 won per dollar.
It is safe to say that the currency swap pact has just begun to prove its
efficacy. However it remains to be seen how long it will last in the face of the
contagion of the global financial crisis.
We believe the deal is just a necessary, but not sufficient, condition for South
Korea to tide over the spreading credit woes originating from the Wall Street
meltdown. That is, the deal itself can never be a panacea for the ongoing
financial calamity.
But, the deal will be a second line of defense against financial instability. In
fact, South Korea has enough foreign currency reserves estimated at $240 billion,
the sixth biggest in the world.
Therefore, it does not necessarily need such a currency swap formula. BOK Gov.
Lee Seong-tae said, "South Korea has made the swap deal as part of efforts to
secure secondary support measures, not because of a shortage of foreign
reserves."
The deal also showcases stepped-up international efforts to jointly cope with the
global financial turmoil.
In a speech to the World Leaders Forum in Seoul, President Lee Myung-bak placed
special emphasis on the currency swap accord, describing it as a good example of
increased policy cooperation between emerging and advanced economies in fighting
the worldwide financial firestorm.
Other positive news is that the International Monetary Fund (IMF) is creating an
emergency fund of up to $100 billion for emerging market economies to help them
ride out the turbulence.
Korean officials said the country may get as much as $22 billion in short-term
liquidity support from the IMF. This will also have a positive effect on South
Korea, in which investors recently went on a panic selling on inflated fears.
South Korea is also seeking to strike a similar currency swap deal with Japan and
China in order to intensify trilateral efforts to stabilize financial systems in
the Asian region.
It is time for both advanced and developing countries to step up their
collaboration to overcome the swirling global financial tsunami and minimize its
fallout on the real economy.
The Group of 20 major economies is scheduled to hold their financial summit in
Washington on Nov. 15. We hope the G20 meeting will hammer out more concrete
action plans to contain the spreading crisis.
(END)
The local financial markets welcomed a currency swap agreement between South Korea and the United States with share prices and the local currency rebounding Thursday.
It was good news that the U.S. Federal Reserve decided to sign a won-dollar swap
deal of up to $30 billion with the Bank of Korea (BOK). The Fed also unveiled a
similar accord with the central banks of Mexico, Brazil and Singapore.
Undoubtedly, the deal will have a symbolic and psychological effect on South
Korea. It is expected to stabilize the volatile won-dollar exchange rate and
shore up the Seoul stock market.
The benchmark KOSPI share price index reclaimed the psychologically important
1,000-point mark, closing 11.9 percent higher at 1,084.72. The local currency
also jumped 12.4 percent to 1,250 won per dollar.
It is safe to say that the currency swap pact has just begun to prove its
efficacy. However it remains to be seen how long it will last in the face of the
contagion of the global financial crisis.
We believe the deal is just a necessary, but not sufficient, condition for South
Korea to tide over the spreading credit woes originating from the Wall Street
meltdown. That is, the deal itself can never be a panacea for the ongoing
financial calamity.
But, the deal will be a second line of defense against financial instability. In
fact, South Korea has enough foreign currency reserves estimated at $240 billion,
the sixth biggest in the world.
Therefore, it does not necessarily need such a currency swap formula. BOK Gov.
Lee Seong-tae said, "South Korea has made the swap deal as part of efforts to
secure secondary support measures, not because of a shortage of foreign
reserves."
The deal also showcases stepped-up international efforts to jointly cope with the
global financial turmoil.
In a speech to the World Leaders Forum in Seoul, President Lee Myung-bak placed
special emphasis on the currency swap accord, describing it as a good example of
increased policy cooperation between emerging and advanced economies in fighting
the worldwide financial firestorm.
Other positive news is that the International Monetary Fund (IMF) is creating an
emergency fund of up to $100 billion for emerging market economies to help them
ride out the turbulence.
Korean officials said the country may get as much as $22 billion in short-term
liquidity support from the IMF. This will also have a positive effect on South
Korea, in which investors recently went on a panic selling on inflated fears.
South Korea is also seeking to strike a similar currency swap deal with Japan and
China in order to intensify trilateral efforts to stabilize financial systems in
the Asian region.
It is time for both advanced and developing countries to step up their
collaboration to overcome the swirling global financial tsunami and minimize its
fallout on the real economy.
The Group of 20 major economies is scheduled to hold their financial summit in
Washington on Nov. 15. We hope the G20 meeting will hammer out more concrete
action plans to contain the spreading crisis.
(END)
