S. Korea calls for currency swap with advanced nations

WASHINGTON, Oct. 11 (Yonhap) -- South Korea's Finance Minister Kang Man-soo
called Saturday for advanced nations to include emerging economies in their
currency swap programs to better cope with the current global financial crisis.
"The turbulence in financial markets that originated in advanced economies is now
spreading all across the world. As a result, emerging economies as well as
developed countries are suffering from the crisis," Kang told a meeting of
finance ministers and central bank chiefs from the so-called G-20 nations.
"However, emerging countries are still not a part of major policy coordination
efforts. For example, currency swaps between central banks are limited to
advanced economies only," he said. "It is critical that policy coordination
involves both advanced and emerging economies."
Currently, the Federal Reserve of the United States and central banks in eight
other advanced nations including Canada, Britain and Japan have currency swap
programs in place aimed at providing extra liquidity to each other.
South Korea's currency market has been suffering from a dollar shortage as banks
and companies are rushing to the safer greenback on concerns over a financial
crisis sparked by the collapse of investment bank Lehman Brothers Holdings Inc.
"We should note that financial turbulence in advanced economies could easily
spread into emerging countries and in turn lead to reverse-spillover from
emerging countries to advanced economies."
The Finance Ministry recently announced that it will inject a total of $10
billion into the nation's won-dollar swap market to provide liquidity amid
tightening credit conditions. The government has spent almost $25 billion since
March to support the won.
Growing jitters over the dollar shortage caused South Korea's currency to lose
significant ground against the U.S. dollar.
The won has depreciated more than 35 percent against the greenback this year,
prompting foreign exchange authorities to intervene massively and putting upward
pressure on inflation.
Meanwhile, Kang met with Japanese Finance Minister Shoichi Nakagawa and agreed to
strengthen policy cooperation between the two neighboring countries to respond to
the evolving financial crisis and a possible economic slowdown.
They also agreed to accelerate working-level discussions on the creation of an
$80 billion multilateral currency swap fund intended to establish a regional
system to provide liquidity.