S. Korea, China, Japan mull expanding currency swap deals

SEOUL, Nov. 15 (Yonhap) -- South Korea, Japan and China are considering expanding
their bilateral currency swap deals in the face of a global credit crunch,
officials here said Saturday.
South Korean Finance Minister Kang Man-soo, along with his Chinese counterpart
Xie Xuren and Japan's Shoichi Nakagawa agreed in Washington to boost financial
cooperation through a possible expansion of existing currency swap deals.
Currently, South Korea and China have a currency swap contract under which Korea
could borrow up to US$4 billion from China. Seoul can also borrow US$13 billion
from Tokyo in case of a credit crunch under a similar deal.
"Last month, South Korea and China shared the view on expanding a bilateral
currency swap agreement in principle. It is meaningful that Korea and Japan also
agreed on the need to expand a currency swap deal for the first time officially,"
an official at the Finance Ministry said.
He said the size of swap contracts or other details will require additional
negotiations between the three countries' finance ministries and central banks,
adding that working-level talks are underway.
If deals for extending the currency swap agreements are reached, they would
provide more liquidity for South Korea, whose foreign exchange reserves, worth of
$212.3 billion, have been in decline.
The move came as South Korea announced a $30 billion swap agreement with the U.S.
Federal Reserve on Oct. 30, which helped ease market jitters about a dollar
shortage. On the same day, the local currency posted its largest daily gain
against the dollar in 11 years.
South Korea's financial markets have been suffering from a dollar shortage as
companies and banks are scrambling to hoard the safer greenback amid the global
financial turmoil, which was sparked by the collapse of U.S. investment bank
Lehman Brothers Holdings Inc.
sooyeon@yna.co.kr
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