SEOUL: South Korea is going to sign a currency swap deal with Switzerland, all eyes are on whether the country will be also able to clinch a bilateral currency swap agreement with Japan and the United States. The Bank of Korea (BOK) will sign the 11.2 trillion won (US$10.6 billion) agreement in Zurich, Switzerland, on February 20. The currency swap deal with Switzerland is particularly meaningful for South Korea because Switzerland is one of key currency countries in the world, according to the government.
Currently, six key currency countries, such as the U.S., Britain, Canada, Switzerland and Japan as well as the Eurozone, have swap arrangements that set no limits on amount and durations of the deals. South Korea will clinch a deal with Switzerland following the one with Canada last year. Swiss franc ranks seventh in terms of foreign exchange transactions around the world and eighth in terms of foreign exchange holdings and international payments. With the upcoming agreement, South Korea has signed a mutual currency swap deal with a total of seven countries, including Canada, China, the United Arab Emirates, Malaysia, Australia, Indonesia and Switzerland, worth US$132.8 billion (143.68 trillion won). In particular, the country closed the deal which has no limit on liquidity provisions and no expiration date with Canada in November last year. The Swiss franc and Canadian dollar has received the AAA credit rating from three global credit rating agencies in the world. As South Korea has extended the agreement with China in October last year and signed the deal with Canada without no limits and no expiration date in November and with Switzerland this time, its financial safety valve has strengthened further. South Korea is having a difficulty in closing the currency swap agreement with other key currency countries. The country’s financial market volatility gradually decreased after it signed the US$30 billion (32.46 trillion won) deal with the U.S. in October 2008 during the global financial crisis. However, the two countries are not officially in talks about the extension after the agreement expired in February 2010.