Is South Korea Seeking a Bilateral Currency Swap with the US in Trade Talks?
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Synopsis
In a pivotal trade discussion, South Korea has proposed a bilateral currency swap with the US, aiming to stabilize its economy amid stalled investment talks. With potential implications on the currency exchange rate and foreign reserves, this proposal could reshape the economic landscape between the two nations.
Key Takeaways
- South Korea proposes a currency swap with the US during trade talks.
- The arrangement aims to protect the won amidst tariff negotiations.
- Seoul has committed to investing US$350 billion in the US.
- Concerns arise over significant dollar outflows affecting exchange rates.
- Historically, swaps have occurred during major crises.
Seoul, Sep 15 (NationPress) South Korea has put forward a proposal for a bilateral currency swap with the United States during ongoing trade discussions with Washington, as reported by officials on Monday. This comes at a time when there seems to be limited progress on Seoul's investment initiative in the US.
The proposal involves establishing an "unlimited" currency swap arrangement with Washington aimed at safeguarding its currency during follow-up discussions regarding a tariff agreement that has been stalled since late July.
As part of this framework, South Korea has committed to investing US$350 billion in the US, contingent upon Washington reducing its "reciprocal" tariffs on South Korean goods from 25% to 15%.
Officials from the presidential office and government have indicated that the US has requested a larger portion of the investment to be made in direct cash, raising fears that significant dollar outflows could lead to a steep increase in the won-dollar exchange rate. By the end of last month, South Korea's foreign reserves were reported to be at $416.3 billion, according to Yonhap news agency.
According to presidential spokesperson Kang Yu-jung, the two nations are still working out the terms, making it challenging to provide definitive insights into each party's stance on the swap deal.
The finance ministry noted that several measures are being considered to lessen the impact of the tariff agreement on the foreign exchange market but did not disclose specific details.
Historically, the two countries have entered into swap agreements only twice, during the 2008 global financial crisis and the 2020 COVID-19 pandemic.
Point of View
It's crucial to observe that South Korea's proposal for a currency swap reflects its proactive approach to international trade and currency stability. The ongoing negotiations highlight the complexities of economic relationships and the necessity for both nations to find common ground.
NationPress
16/09/2025
Frequently Asked Questions
What is a bilateral currency swap?
A bilateral currency swap is an agreement between two countries to exchange currencies for a specified period, allowing them to stabilize their currencies and manage liquidity.
Why is South Korea proposing this swap with the US?
South Korea seeks to protect its currency amid stalled investment negotiations and to mitigate potential impacts from tariff changes.
What are the potential benefits of this swap?
The swap could help maintain stability in the won-dollar exchange rate and ensure liquidity in South Korea's foreign reserves.
How does this affect US-South Korea trade relations?
The proposal aims to enhance collaboration and strengthen economic ties between the two nations, facilitating smoother trade operations.
Have South Korea and the US engaged in currency swaps before?
Yes, they have previously signed currency swap agreements during the 2008 financial crisis and the COVID-19 pandemic in 2020.
