SKorea praises extension of Fed currency swap deal

SEOUL, South Korea - The Bank of Korea said Wednesday that the extension of a currency swap agreement with the U.S. Federal Reserve will help stabilize the country's financial market.

The Fed announced Tuesday that it was had extended credit lines with other major central banks, including South Korea's, by six months to the end of October to supply them with dollars, a step meant to help fight the global credit crunch.

The agreement with the Bank of Korea, first announced in late October last year, offered it access to up to $30 billion through the end of April 2009.

"The Bank of Korea expects that this action of extending its swap agreement with the Federal Reserve should contribute to improving the foreign currency funding conditions of banks and restoring stability to the financial market in Korea," the central bank said in a statement.

Swap agreements generally allow one central bank to borrow a currency from another, offering an equivalent amount of its own as collateral.

The Bank of Korea has been drawing on the funds to provide loans to banks through competitive auctions. South Korean banks have had difficulty acquiring dollars since the global financial crisis froze up lending.

So far, the Bank of Korea has drawn about $16.3 billion of the total, said BOK spokesman Kim Seong.

In addition to the Fed deal, the Bank of Korea moved late last year to expand currency swap arrangements with the Bank of Japan and the People's Bank of China.

The Fed said in a statement Tuesday that the extensions were to "address continued pressures in global U.S. dollar funding markets."

The extensions apply to agreements with more than a dozen central banks, including the Bank of England and the European Central Bank, according to the Fed.

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