Korea using Fed swap lines (cont.)

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Bank of Korea to Supply $3 Billion to Local Banks

Jan 19 (Korea Times) — South Korea’s central bank said Monday it will provide $3 billion to local banks suffering from a dollar liquidity crunch in the wake of the U.S.-sparked global financial turmoil, Yonhap News reported Monday.

The Bank of Korea (BOK) said the money is part of a $30 billion currency swap agreement it signed with the U.S. Federal Reserve in late October. The BOK has tapped $13.35 billion out of the swap line so far.

The central bank plans to hold an auction Tuesday and the loans will mature in 84 days.

The move comes amid rising market jitters about South Korea’s falling foreign exchange reserves, the world’s sixth-largest.

The country’s foreign reserves, which totaled $201.22 billion as of the end of December, fell for eight consecutive months in 2008, before climbing slightly in December as a weaker U.S. dollar boosted the dollar value of assets in other currencies.

South Korea also reached new currency swap arrangements with China and Japan in late December, expanding its existing swap lines with the two countries to $30 billion each.