Ⓒ JoongAng Ilbo / JoongAng Ilbo Japanese version2022.07.21 11:14
In response to the appreciation of the dollar in South Korea, there are growing calls to conclude a Korea-US currency swap and prepare a safety valve in the foreign exchange market, and the FIMA repo facility is drawing attention as the next means of Korea-US currency swap.
The FIMA repo facility, which has a trading limit of $ 60 billion to supply dollars to South Korea in the event of an emergency, has never been used since it was introduced in December last year.
The FIMA Repo Facility is a system in which the Federal Reserve Board (FRB) buys back US Treasuries held by central banks in other countries on condition that they are sold back. Instead of depositing US Treasuries held by the Bank of Korea as collateral with the FRB, it has the advantage of being able to raise dollars at a low interest rate at the upper level of the US policy interest rate (currently 1.75%) within the transaction limit.
The FIMA repo facility currently in operation and the Korean-American currency swap are the same in that they serve as a safety valve for the foreign exchange market, but there are differences in the operation method and effect. The FIMA repo facility may affect the US bond market by depositing US Treasuries, but the Korea-US currency swap does not affect the bond market because it is a method of exchanging won directly with the dollar.
The dollar, which is a safe asset, has strengthened due to the strong austerity movement in the United States, and the dollar has strengthened to the 1300 won level. Some are worried that the won will weaken and the dollar will strengthen to the 1,400 won level if the rise in US prices does not slow down. Foreign exchange reserves, which are the country’s emergency funds, are rapidly declining as foreign exchange authorities defend the exchange rate. Foreign exchange reserves have fallen by $ 24.84 billion in the first six months of the year.
