Seoul: South Korea's central bank has not discussed a currency swap with the U.S. Treasury Department as a solution for the ongoing tariff negotiations with Washington, Bank of Korea (BOK) Governor Rhee Chang-yong stated on Monday. Rhee addressed the issue during a parliamentary audit in Seoul, countering suggestions that a currency swap could assist in finalizing the tariff agreement, including financing South Korea's $350 billion investment commitment.
According to Yonhap News Agency, Rhee emphasized that the BOK has not considered engaging in a currency swap with the U.S. Treasury. He acknowledged references to other cases but clarified that currency swaps between central banks are typically meant for short-term liquidity, not long-term objectives. Rhee further noted that the legal feasibility of a direct swap between the BOK and the U.S. Treasury Department remains uncertain, and any arrangement involving the U.S. Treasury's Exchange Stabilization Fund would necessitate the South Korean government, rather than the BOK, to act as the counterparty.
In July, South Korea and the United States reached a preliminary agreement where Washington would implement a 15 percent tariff on South Korean goods, as opposed to the initially proposed 25 percent, while Seoul would establish a $350 billion fund for U.S. investments. However, a formal agreement has yet to be finalized, and negotiations continue regarding the specifics.
The Seoul government has suggested establishing a foreign exchange swap line with the U.S. President Lee Jae Myung has warned that without adequate safeguards, accepting the current U.S. investment demands could lead to an economic crisis in Korea similar to the 1997 financial meltdown.