The United States and South Korea agreed on Saturday to set up liquidity facilities to stabilize financial markets if needed, Korea’s finance ministry said after a teleconference between the two finance chiefs. country.

The won is near its lowest level since March 2009 and has weakened 17% against the US dollar’s rise so far in 2022, amid a sell-off in emerging market currencies as the Reserve federal government is aggressively raising interest rates.

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“Both countries are ready to work closely together to put in place liquidity facilities if necessary, for example when financial instability is aggravated by the spread of (a) shortage of liquidity in major economies, including the Korea,” the ministry said in a statement after the call. between US Treasury Secretary Janet Yellen and South Korean Finance Minister Choo Kyung-ho.

The deal reached on Saturday repeats the US statement made during Yellen’s last visit to Seoul in July, amid growing calls for the Bank of Korea to arrange a currency swap with the Federal Reserve to stabilize the dollar market. won.

However, the statement released on Saturday did not specify whether the facilities that may be deployed referred to a currency exchange, and South Korea’s finance ministry did not provide further details.

A $60 billion currency swap pact set up in March 2020 between the two countries’ central banks as an emergency measure to stabilize markets expired at the end of last year.

Such an exchange would allow South Korea to borrow a certain amount of U.S. dollars for a predefined period and rate, in exchange for won, to solve dollar liquidity difficulties.

To help protect one of the world’s worst-performing currencies, South Korean authorities recently organized a $10 billion currency swap program with the country’s public pension fund, a tool that allows the fund to finance its investments abroad with the foreign exchange reserves of the central bank, instead of buying dollars on the spot market.

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