Currency swap deal to help stabilize market: official

SEOUL, Oct. 31 (Yonhap) -- The currency swap deal between South Korea and the United States will help stabilize the local foreign exchange market that has fluctuated sharply in recent weeks, a finance ministry official said Friday.

The U.S. Federal Reserve announced Wednesday that it will sign a currency swap
arrangement of up to US$30 billion with each of the central banks of South Korea,
Mexico, Brazil and Singapore to improve their dollar liquidity.
"The arrangement is a clear indication that the country is not headed towards
another financial crisis that paralyzed the country in 1997-98," Deputy Finance
Minister Shin Je-yoon said in a radio interview.
The Korean won has dropped more than 30 percent against the greenback this year,
which contributed to the tumble of the local bourse, sapped business investment
and hurt consumer spending.
"The arrangement will help alleviate unfounded rumors that have fueled
uncertainty in the market, and is a testament to the soundness of South Korea's
economic fundamentals despite some problems in liquidity," he stressed.
The official said that South Korea does not plan to impose any restrictions on
the outflow of funds by foreigners.
"There are no plans to impose restrictions since taking such a step will hurt the
country's international credibility," Shin said.
Shin said that Seoul is examining the feasibility of guaranteeing payment of
foreign currency deposits to further alleviate market concerns, but nothing has
been decided at present.
He added that the possibility of expanding the currency swap arrangement with
China and Japan, or the setting up of a joint fund to stabilize exchange rates,
should be viewed as part of the international arrangement.
yonngong@yna.co.kr
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