U.S. follows the 2008 global financial crisis manual

The Bank of Korea announced Thursday that it will sign a 60-billion-dollar currency swap agreement with the U.S. Federal Reserve. This is two times the scale of the swap during the 2008 global financial crisis. The Fed has signed a currency swap agreement with eight other countries including Australia and Brazil. It is interpreted as a proactive measure to put out the dollar shortage early on as the global financial market is seized with terror due to the novel coronavirus outbreak.

Analysts say that the U.S. currency swap agreements are signed based on the crisis management manual of the 2008 financial crisis. While opening an era of zero interest rates with a “big cut” of one percentage point in the benchmark rate on Sunday, the Fed decided Tuesday to re-establish the Commercial Paper Funding Facility while announcing to help ensure liquidity for money market mutual funds.

But some project that the effect of the currency swap between South Korea and the U.S. would be short-lived. “Financial markets are likely to falter as uncertainties such as the virus pandemic have not disappeared yet,” said Kang Hyun-ju, economist at Korea Capital Market Institute.


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