秋 and Yellen: “Korea maintains solid external soundness”
Presidential Office “Including currency swaps in liquidity supply”
However, it seems that the full-fledged discussion of currency swaps is still pending.
Lee Chang-yong “will be discussed internationally when the time comes”
▲ Janet Yellen – Kyung-ho Choo
Choo Kyung-ho (right), Deputy Prime Minister and Minister of Strategy and Finance, poses for a commemorative photo during an official dinner held following a meeting of US Treasury Secretary Janet Yellen with US Treasury Secretary Janet Yellen at the Korea Furniture Museum in Seongbuk-gu, Seoul on the 19th. 2022. 7. 19. Provided by the Ministry of Strategy and Finance
As the foreign exchange market became unstable, with the won-dollar exchange rate breaking above 1440 won during the day for the first time in 13 years and 6 months, the finance ministers of the Republic of Korea and the United States reaffirmed their position that they would cooperate to provide liquidity if necessary. With the observation that the high exchange rate will continue until the end of the year, it is noteworthy whether opinions regarding the benefits and disadvantages of the Korea-US currency swap will rise once more.
Deputy Prime Minister and Minister of Strategy and Finance Choo Kyung-ho and U.S. Treasury Secretary Janet Yellen said through a conference call on the 30th of last month that, despite the sharp rise in the won-dollar exchange rate, the Korean economy still maintains solid external soundness thanks to good foreign exchange liquidity and sufficient foreign exchange reserves. The Ministry of Strategy and Finance said on the 1st that it had evaluated it. The two Ministers confirmed that the two countries are ready to work closely together to implement liquidity supply mechanisms if necessary, such as when financial instability is exacerbated due to the spread of liquidity crunch in major countries, including Korea, and decided to continue the related discussions.
The consensus on liquidity supply was previously discussed when President Yoon Seok-yeol and US President Joe Biden met three times in London and New York on the 19th and 21st of last month. In response, Choi Sang-mok, chief economic officer of the presidential office, explained that the liquidity supply device includes a currency swap between Korea and the United States.
However, it seems that the two countries have not started in earnest in discussions to resume the currency swap. At a plenary meeting of the National Assembly Planning and Finance Committee on the 26th of last month, Bank of Korea Governor Lee Chang-yong, who was the party to discuss the resumption of the Korea-US currency swap, said, “There is an exchange of information (related to the currency swap),” but “If you look at the terms of the currency swap, the Fed has internal standards. When the time comes, it will be discussed internationally.”
This conference call was made at the request of the US Treasury Department. It was the fourth and last meeting since the inauguration of Deputy Prime Minister Chu, the first official conversation between the two in more than two months since the ROK-U.S. Finance Ministers’ Meeting on July 19th. Deputy Prime Minister Choo and Minister Yellen agreed that uncertainties in the global real economy and financial markets are increasing due to reduced global liquidity and the prolonged war between Russia and Ukraine. In particular, they agreed to continue close communication and coordination between the two countries amid potential additional downside risks such as the European energy crisis from Russia and debt sustainability issues in emerging countries.
Reporter Sejong Park Ki-seok
