Korea Signs W5 Trillion Currency Swap with Australia

Korea and Australia have signed a W5 trillion currency swap agreement (US$1=W1,072).

The Ministry of Strategy and Planning said Bank of Korea Governor Kim Choong-soo and Australia central bank Governor Glenn Stevens signed the deal in Sydney on Sunday.

Currency swaps can be used to stabilize economies in a financial crisis by borrowing from the treasury of the other government using its own currency as collateral. Also, companies doing business with the other nation can conduct transactions in either currency without having to exchange money.

The deal with Australia was agreed between the leaders of the two countries in October last year. Korea now has currency swap agreements with Australia, China, Indonesia, Japan, Malaysia, and the United Arab Emirates.

The Australian dollar is the fifth most-traded currency in international markets after the U.S. dollar, euro, Japanese yen and British pound.

A ministry official said, "Australia has vast natural resources and was able to maintain a high credit rating despite the global financial crisis. Korea needs to bolster its financial safety net to absorb the shock of the U.S. tapering of its quantitative easing program."

englishnews@chosun.com / Feb. 24, 2014 09:08 KST