Bank of Korea to skip dollar auction this week

SEOUL, March 10 (Yonhap) -- South Korea's central bank said Tuesday it will not
provide dollar liquidity to local banks this week because they are making their
own efforts to borrow from overseas and the nation's trade balance is improving.

Since October, the Bank of Korea (BOK) has provided foreign currency liquidity to
cash-strapped banks by tapping foreign exchange reserves or a US$30 billion
currency swap line with the U.S. Federal Reserve.
"The central bank decided not to hold an auction to provide dollars to banks this
week as overseas borrowing by lenders has improved and their efforts to get
overseas funding are expected to continue," the BOK said in a statement. "The
trade balance also swung to a surplus in February and in March, and the country
is likely to see a considerable surplus."
It was the first time that the BOK has missed an auction for dollar supply since
it introduced an open bidding system for won-dollar swaps in October last year.
The BOK said it will continue to evaluate global financial markets and the
country's current account balance, and will remain flexible in deciding whether
to provide dollar liquidity.
Hit by the collapse of Lehman Brothers Holdings Inc., local banks have been
suffering from dollar shortages, sparking concerns they may have difficulty in
meeting financing needs and service their debt.
According to the BOK, it has supplied $10.27 billion to local banks through swap
transactions and has tapped $16.35 billion out of the currency swap facility with
the Fed.
South Korea posted its first trade deficit in more than a decade in 2008 due to a
surge in oil prices. In January, the country saw a deficit of $3.36 billion, but
the trade balance swung to a surplus of $3.3 billion last month.
sooyeon@yna.co.kr
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