South Korea and Japan said on Wednesday that they would expand their existing currency deal of swapping money to the equivalent of $70 billion dollars to deal with uncertainties with the European debt crisis.
A currency swap is an agreement that allows a central bank in two agreeing countries to swap on currency for another at an agreed-upon interest price. This helps to give a country more scope to defend itself during a currency crisis. Since the late 1990s, South Korea has benefited from such deals with Japan and the United States with the Asian financial crisis.
This new arrangement expanded a $13 million dollar credit line that each of the two countries guaranteed for each other. South Korea would have more leverage to defend its currency. This was discussed when Mr. Lee (South Korea) and Mr. Noda (Japan) met at a meeting in where they both agreed to work together on issues such as the nuclear threat from North Korea.
The one-year currency swap pact that was agreed on Wednesday would help to give South Korea access to $4 billion dollars, and the equivalent of $3 billion in yen. Japan would have access to $4 billion dollars also along with $3 billion dollars in won.
사랑,
Tai Le
- Japan and South Korea Strengthen Currency Ties
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