SEOUL– South Korea and the United Arab Emirates have renewed their currency swap deal as part of efforts to bolster bilateral trade and financial cooperation, Seoul’s central bank said Wednesday.
Under the five-year deal, the two countries can exchange 6.1 trillion won (US$4.96 billion) for 20 billion dirham or vice versa to help secure funds to settle payments linked to their trade and brace for volatility in financial markets, according to the Bank of Korea (BOK).
Their central banks signed an initial three-year currency swap deal in October 2013. After a yearslong hiatus, they inked a three-year deal again in 2019, which expired Tuesday.
The latest extension went into effect on Wednesday with the possibility of further extension by mutual consent, the BOK said.
A currency swap is a tool for defending against financial turmoil by allowing a country beset by a liquidity crunch to borrow money from others with its own currency.
The UAE is one of South Korea’s major trading partners in the Middle East. South Korea buys about 6 percent of its crude oil imports from the country.
Currently, South Korea also maintains swap arrangements with seven other countries, including China, Australia and Canada, according to the BOK.
Source: Yonhap News Agency