1. Bank of Korea Governor Lee Seong-tae entering room for news briefing
3. Pan right of briefing
4. SOUNDBITE (Korean) Lee Seong-tae, Bank of Korea Governor:
“The Bank of Korea agreed to sign a currency swap deal with the US Federal Reserve. The currency swap arrangement is a deal in which we put our won currency in the US Federal Reserve, and instead, we borrow and use US dollars. The size of this agreement is worth 30 (b) billion (US dollars). We can use up to 30 (b) billion (US dollars) with several divisions.”
6. Mid of reporters
7. Mid of Lee
8. SOUNDBITE (Korean) Lee Seong-tae, Bank of Korea Governor:
“We will have the effect of expanding our foreign currency reserve for sure, and it (currency swap agreement) will hugely attribute in stabilising our foreign exchange market.”
9. Pan right of the briefing room
South Korea’s benchmark stock index rose sharply following an interest rate cut by the United States Federal Reserve and a credit deal between the US and South Korean central banks.
The South Korean won surged against the dollar.
The won rose 5.3 percent against the dollar, and at one point traded as much as 7.1 percent higher.
Speaking at a news conference in the capital, the head of Seoul’s central bank said the currency swap deal would help ease the dollar shortage of local lenders and stabilise the local financial market.
The Korea Composite Stock Price Index was up 62.09 points, or 6.41 percent, to 1,031.06 in midmorning trading on Thursday.
The South Korean currency has declined sharply this year as foreign investors sell stocks at a record pace and amid concerns over the health of South Korean banks amid the credit crisis.
Despite Thursday’s sharp early gain, the won was still nearly 31 percent lower against the dollar this year.
In Washington on Wednesday, the Fed reduced its target for the federal funds rate, the interest banks charge on overnight loans, to one percent from 1.5 percent, a move aimed at boosting the US economy reeling from the global financial crisis.
It also announced jointly with the central banks of South Korea, Brazil, Mexico and Singapore that it would supply new lines of credit worth up to 30 (b) billion US dollars to those institutions to help deal with the global credit crisis.
It is the latest in a series of “swap” arrangements where the Fed provides dollars for reserves of the other nations’ currencies.
The Fed said the new credit lines were designed to help improve liquidity conditions in global financial markets by increasing the global availability of US dollars.
South Korean domestic banks have had difficulty during the liquidity crunch acquiring dollars needed to roll over loans taken out overseas.
The government and the Bank of Korea earlier this month announced a 100 (b) billion US dollar plan to guarantee local banks’ foreign currency loans until the end of June next year.
The Fed had previously established reciprocal swap arrangements with the central banks of Australia, Canada, Denmark, England, Japan, New Zealand, Norway, Sweden, Switzerland and the European Central Bank.
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