BOK extends deadline for currency swap line with Fed by 6 months

SEOUL, Feb. 4 (Yonhap) -- The Bank of Korea (BOK) and the U.S. Federal Reserve have extended a deadline for their currency swap agreement by six months in a move to help ease market jitters over dollar shortages, the South Korean central bank said Wednesday.

In late October 2008, the BOK announced a $30 billion currency swap arrangement
with the Fed, tapping $16.35 billion from the swap line so far.
The BOK said in a statement that the deal, whose deadline was set to expire on
April 30, will be extended until Oct. 30. The size of the swap facility remains
intact.
The Fed also applied the extension of the deadline to the swap lines of 12 other
central banks. The Bank of Japan will decide whether to extend the arrangement at
its next monetary policy meeting.
"This action of extending its swap agreement with the Federal Reserve should
contribute to improving the foreign currency funding conditions of banks and
restoring stability to the financial market in Korea," the BOK said.
The move comes as market jitters over dollar shortages have lingered in the wake
of the collapse of the U.S. investment bank Lehman Brothers Holdings Inc.
South Korea's foreign exchange reserves, which totaled $201.74 billion as of the
end of January, fell for eight consecutive months in 2008 before climbing
slightly in December. The country's foreign reserves rose for the second straight
month in January as local banks repaid part of foreign currency loans extended by
the BOK.
The use of the swap arrangement helped ease fears about declining foreign
reserves. The Korean currency fell 25.7 percent to the dollar last year alone,
becoming one of the world's worst-performing currencies.
"When necessary, the BOK will continue to offer dollar liquidity to banks through
competitive auctions by tapping the swap facility," Ahn Byung-chan, head of the
central bank's international bureau, told reporters.
In a related move, South Korea reached new currency swap arrangements with China
and Japan in mid-December, expanding its existing swap lines with the two
countries to $30 billion each.
The swap deal with China will be effective for three years, with a possibility of
an extension through agreement, while that with Japan will be in effect until the
end of April.
"As the swap arrangement with the U.S. is extended, the BOK expects there will be
no major difficulties in extending a deadline with the Bank of Japan," Ahn said.