South Korea and China signed a deal to extend their bilateral currency swap agreement and expand the size, the Bank of Korea (BOK) said Thursday, a move aimed at helping ease a potential liquidity crunch amid the pandemic.
The BOK and People's Bank of China clinched a won-yuan currency swap deal worth US$26 billion in December 2008 in the midst of the global financial crisis. They have extended it by three years three times so far and enlarged the size to some 64 trillion won ($56.5 billion) in 2011.
Under the new deal, South Korea and China extended the swap deal by another five years and increased the size to 70 trillion won, according to the BOK, South Korean News Agency (Yonhap) reported.
A currency swap is a tool meant to defend against financial turmoil by allowing a country beset by a liquidity crunch to borrow money from others with its own currency.
The central bank said the extension of the currency swap deal is expected to help boost bilateral trade between the two nations and stabilize financial markets in the region.
"This action will serve as a foundation for further enhancing the financial and monetary cooperation between two central banks," the BOK said in an English statement.
In July, South Korea and the United States agreed to extend a $60 billion bilateral currency swap agreement by six months in a bid to ease market uncertainties amid the COVID-19 pandemic.
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