Seoul, Sep 15 South Korea has proposed setting up a bilateral currency swap with the United States in recent trade talks with Washington, according to officials Monday, amid prospects of little breakthrough in Seoul’s investment package in the US.
Seoul has made the proposal of establishing an “unlimited” currency swap arrangement with Washington to defend its currency in its follow-up negotiations on a tariff deal stuck between the two countries in late July.
Under the framework deal, South Korea pledged to invest US$350 billion in the US in exchange for Washington lowering its “reciprocal” tariffs on South Korea from 25 per cent to 15 per cent.
According to officials at the presidential office and the government, the US has called for a greater share of the investment to be made in direct cash, raising concerns that a massive dollar outflow could trigger a sharp rise in the won-dollar exchange rate. As of the end of last month, South Korea’s foreign reserves stood at $416.3 billion, Yonhap news agency reported.
South Korea and the US “are still negotiating the terms, and so it is difficult to say anything definitive about each side’s position,” presidential spokesperson Kang Yu-jung said during a press briefing on Sunday, when asked if Seoul is seeking a swap deal.
The finance ministry also said various measures are under discussion to help minimise the impact of the tariff deal on the foreign exchange market but declined to confirm specific details.
The two countries have previously signed swap arrangements only twice, during the 2008 global financial crisis and the 2020 COVID-19 pandemic.
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