Lee Says BOK to Pursue Multilateral Currency Swaps
Written on May 28, 2009
Bank of Korea Governor Lee Seong Tae said the central bank will pursue multilateral currency swaps with Asian nations.
“We will seek to strengthen our international financial cooperation still further by, for example, striving to construct a framework of multilateral currency swap arrangements among countries in the Asian region,” he said at a Euromoney Conference in Seoul today.
Policy makers in the region are working to build a $120 billion pool of foreign-exchange reserves that can be used by countries to defend their currencies and battle fallout from the global financial crisis. The initiative would broaden the current Chiang Mai Initiative, which only allows bilateral swaps.
The fund may help ensure central banks have enough to shield their currencies from speculative attacks such as those that depleted the reserves of Indonesia, Thailand and South Korea during a financial crisis a decade ago. South Korea has strengthened currency arrangements with Japan, China and the U.S. to ensure it has enough reserves to combat a slide in the won.
Lee said bilateral currency swap deals helped stabilize the nation’s foreign-exchange markets during this financial crisis no credit check payday loans. The won has risen 20 percent against the dollar in the past three months after tumbling in 2008.
While the country’s financial markets and real economy have been showing signs of improvement, there are still downside risks because of the global downturn and deteriorating labor- market conditions, Lee said.
Emphasis on Recovery
He added that the central bank will, for the time being, conduct its monetary policy by placing emphasis on supporting the recovery and stabilizing the financial markets. The Bank of Korea kept the benchmark seven-day repurchase rate unchanged at a record-low 2 percent this month.
Even if the central bank maintains this monetary easing stance for a while, “prices are expected to remain on their downwardly stable track since demand-side inflation pressures are almost absent,” he said.
Filed in: marketing.