South Korea's central bank said Wednesday it has extended a currency swap agreement with its Australian counterpart, a move that could further strengthen bilateral financial cooperation.
The three-year deal, which went into effect earlier in the day, allows for the exchange of up to nine trillion won (7.7 billion US dollars) or AU$10 billion in local currencies between the two central banks. Under the initial swap deal in 2014, the exchange of local currencies was set at up to five trillion won or AU$5 billion.
"This agreement is designed to promote bilateral trade for the economic development of the two countries, to enhance financial stability and for other mutually agreed purposes," the BOK said in a statement. It also said the agreement will ensure that trade between the two countries can continue to be settled in local currency even in times of financial stress.
The swap deal is set to expire on February 7, 2020, and could be extended by consent from both sides. A currency swap is a tool for defending against financial turmoil by allowing a country beset by a liquidity crunch to borrow money from others with its own currency.
Australia is South Korea's eighth-largest trading partner with their bilateral trade volume reaching $22.7 billion in 2016. The latest deal came two weeks after the BOK extended a currency swap line with its Malaysian counterpart. Under the deal that will last until January 2020, the two sides can exchange five trillion won for 15 billion ringgit ($3.3 billion) or vice versa.