(ATTN: UPDATES with more details throughout; ADD photo)
SEOUL, July 19 (Yonhap) — South Korea and the United States agreed on Tuesday to set up liquidity facilities, if needed, as part of cooperative efforts to stabilize the foreign exchange market.
Seoul has also expressed willingness to join a Russian oil price cap proposal, after Finance Minister Choo Kyung-ho and US Treasury Secretary Janet Yellen met in Seoul to discuss global economic issues and bilateral.
Choo and Yellen agreed to cooperate closely to help stabilize the foreign exchange market, according to Seoul’s finance ministry.
The two sides “have the ability to implement various cooperative actions, such as liquidity facilities, if necessary,” the ministry said in a statement after the talks.
The move appears to leave open the possibility of opening a currency swap line between South Korea and the United States, if needed.
South Korea’s $60 billion currency swap line with the United States expired at the end of last year. The Bank of Korea and the Federal Reserve signed the swap facility in March 2020 to mitigate market routs caused by the pandemic and extended the agreement three times.
Volatility in the financial market intensified as demand for the dollar increased due to the Fed’s aggressive monetary tightening. Since the start of the year, the won has lost more than 9% against the US dollar.
Choo said South Korea’s foreign exchange liquidity conditions currently remain “stable”, but the government plans to recalibrate its contingency plan to better deal with emergency economic situations.
Meanwhile, Yellen appreciated South Korea for expressing its intention to join Russia’s oil price cap project, according to the finance ministry.
The United States has asked South Korea to join the price cap in an effort to help stabilize high energy prices and prevent Russia from funding its war chest with export earnings of oil.
Choo stressed that the price cap system should be designed effectively to help stabilize global oil prices and ease inflationary pressure.
The finance chiefs agreed on the need to deepen economic cooperation and policy coordination between the two countries amid heightened economic uncertainty due to the protracted war between Russia and Ukraine and global tightening efforts monetary.
Yellen arrived in South Korea on Monday evening for a three-day visit as part of her maiden trip to Asia that included stops in Japan and Indonesia. It was the first visit by a U.S. Treasury Secretary to South Korea since 2016.
Earlier in the day, she visited a research and development complex run by LG Group in western Seoul to call for building resilient supply chains with South Korea on semiconductors, batteries and other key materials.