South Korea signs US$4.5 billion currency swap deal with Australia
February 24, 2014, 12:00 am TWN
SEOUL--South Korea and Australia signed Sunday a currency swap deal worth US$4.5 billion, Seoul's central bank said, in a move to boost trades and help curb currency swings.
The deal — signed by the countries' central bank governors — allows the two nations to purchase and repurchase each other's currency of up to 5 trillion won, the central Bank of Korea said in a statement.
The three-year deal, which is renewable upon agreement, will allow greater flexibility for businesses to use local currencies for trade that have been commonly settled in U.S. dollars, the statement said.
"The agreement is designed to promote bilateral trade for the economic development of the two countries," it added.
Bilateral trade amounted to US$30 billion in 2013, the bank said, adding that South Korea — Asia's fourth-largest economy — was also Australia's fourth-biggest trading partner.
Mineral-rich Australia is also the South's seventh-largest trading partner, exporting mostly iron ore, coal and crude oil.
South Korea, a small and open economy, has in recent years sought to guard against financial turmoil through a series of currency swap deals.
Last October it signed currency swap deals worth US$10 billion and US$5.4 billion with Indonesia and the United Arab Emirates, respectively.
Seoul also maintains separate currency-swap agreements worth 64 trillion won with China and US$10 billion with Japan as part of a multilateral deal known as the Chiang Mai Initiative.