Posted December. 18, 2009 08:59,
The U.S. Federal Reserve Board yesterday said it will terminate in February its currency swap lines with 14 nations, including Korea.
The Bank of Korea said it has retrieved the remaining balance of foreign currency loans from the currency swap line with the Fed. The U.S. decision to terminate the line will not affect the Korean economy since the global financial market has significantly improved, it added.
The Federal Open Market Committee, in charge of U.S. monetary policy, released a statement saying the Fed temporarily injected liquidity to revive the frozen financial market and will terminate the policy Feb. 1 as scheduled.
The committee is negotiating with central banks to terminate the lines in February.
The Bank of Korea and the Fed signed an agreement in October last year on setting up a currency swap line worth up to 30 billion U.S. dollars in exchange for putting Korean won notes in the Fed. The deal was initially to last for six months but was extended by six months and later three months.
The Bank of Korea said it has enough foreign currency reserves to sustain its economy, so it canceled a competitive bid for foreign currency loans Tuesday. It also retrieved 450 million dollars in foreign currency loans that came due yesterday.
Shin Je-yoon, in charge of international affairs at the Strategy and Finance Ministry, said, Since Korea has enough foreign exchange reserves and foreign liquidity, the Feds decision wont affect the Korean economy at all. The Bank of Korea will separately discuss the extension of bilateral currency swaps with Japan and China.
Koreas foreign exchange reserves reached 270.89 billion dollars last month, far exceeding its foreign debt of 180 billion dollars to mature in under a year.
A currency swap worth 30 billion dollars between Korea and Japan will come due between February next year and February 2012. The Bank of Koreas currency swap worth 30 billion dollars with China will mature in two years.
The Fed also froze its benchmark federal funds rate between zero and 0.25 percent and opted to maintain its record-low interest rate policy for the time being.