End of swap line with U.S. to have little impact on market: BOK

(ATTN: RECASTS headline, lead to clarify; UPDATES with more details in paras
2-3,8,12,14)
SEOUL, Dec. 17 (Yonhap) -- The Bank of Korea (BOK) said Thursday that the planned
expiration of its swap arrangement with the U.S. Federal Reserve will have little
impact on South Korea's foreign exchange markets.

On Oct. 30, 2008, the Fed reached a US$30 billion currency swap arrangement with
the BOK in the midst of rising global financial turmoil, a move which helped
stabilize the local financial markets. The accord was extended twice through Feb.
1.
On Wednesday, the Fed said that it is working with other central banks to close
temporary liquidity swap arrangements by that date.
"Even if the swap facility ends, there will not be any impact on the South Korean
financial market," Ahn Byung-chan, director general at the BOK's international
bureau, told a press conference.
"The Fed's planned move reflects the fact that the global financial market
situation is improving."
Although there have been some market jitters, including the Dubai debt crisis and
Greece's credit downgrade, such events are not seen as risk factors that could
sharply dent global financial markets.
The swap line came as the local currency was pounded by concerns over a possible
dollar shortage in South Korea following the collapse of the U.S. investment bank
Lehman Brothers Holdings Inc. The won tumbled 25.7 percent to the dollar last
year alone.
The BOK has tapped $16.35 billion out of the swap arrangement so far to provide
foreign currency liquidity to cash-strapped banks. On Thursday, the central bank
said it has repaid all of the money as it recouped the remainder of its foreign
currency loans to banks worth $450 million.
The swap arrangement helped ease fears about declining foreign reserves,
stabilizing the local currency.
The Korean currency has since gained against the U.S. dollar as the country's
current account remained in the black for the ninth straight month in October and
foreign investors snapped up local stocks. The won has risen about 35 percent to
the dollar since early March when it hit an 11-year low.
South Korea's foreign reserves, the world's sixth-largest, rose to a record
$270.89 billion as of the end of November, rebounding from eighth straight months
of decline into November 2008 as foreign exchange authorities unloaded dollar
holdings to stem the won's fall and ease a deepening credit squeeze.
In a related move, South Korea reached new currency swap arrangements with China
and Japan in mid-December last year, expanding its existing swap lines with the
two countries to $30 billion each.
Ahn added the U.S. move will likely not impact possible extensions of the swap
facilities with China and Japan as such issues will be discussed separately.
sooyeon@yna.co.kr
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