Global: UAE, South Korea central banks extend currency swap agreement for 5 years

The Central Bank of the UAE (CBUAE) and the Bank of Korea (BoK) on Wednesday renewed the bilateral local currency swap agreement to promote bilateral trade and financial cooperation.

This agreement was signed by Khaled Mohamed Balama, governor of the UAE Central Bank and Juyeol Lee, governor of the South Korean central bank.

The agreement, which was originally signed in 2013, will continue to allow the exchange of local currencies between the two central banks of up to Dh20 billion and to 6.1 trillion South Korean won for five years, with the possibility of extension by mutual consent.

The renewed agreement will come into effect from April 13, 2022.

Usually, bilateral currency swap agreements are signed to hedge exposure to exchange-rate risk and to reduce the cost of borrowing in a foreign currency. It also helps central banks to diversify their foreign exchange reserves which brings stability to local currency.

“The agreement with the Bank of Korea contributes significantly to the development of economic and financial markets in both countries. It reflects the desire to enhance our bilateral cooperation on financial matters, particularly on trade and investment, and to strengthen financial stability,” said Balama.