Seoul: South Korea has proposed setting up a bilateral currency swap with the United States in recent trade talks with Washington, amid prospects of little breakthrough in Seoul’s investment package in the U.S.

According to Yonhap News Agency, Seoul has made the proposal of establishing an “unlimited” currency swap arrangement with Washington to defend its currency in its follow-up negotiations on a tariff deal stuck between the two countries in late July. Under the framework deal, South Korea pledged to invest US$350 billion in the U.S. in exchange for Washington lowering its “reciprocal” tariffs on South Korea from 25 percent to 15 percent.

Officials at the presidential office and the government revealed that the U.S. has called for a greater share of the investment to be made in direct cash, raising concerns that a massive dollar outflow could trigger a sharp rise in the won-dollar exchange rate. As of the end of last month, South Korea’s foreign reserves stood at $416.3 billion.

South Korea and the U.S. “are still negotiating the terms, and so it is difficult to say anything definitive about each side’s position,” presidential spokesperson Kang Yu-jung stated during a press briefing. The finance ministry also mentioned that various measures are under discussion to help minimize the impact of the tariff deal on the foreign exchange market but declined to confirm specific details.

The two countries have previously signed swap arrangements only twice, during the 2008 global financial crisis and the 2020 COVID-19 pandemic.