South Korea, UAE Sign Currency Swap Deal For Trade Settlements
South Korea and the United Arab Emirates (UAE) signed a won-dirham currency swap deal Sunday as part of their efforts to settle payments for bi-lateral trade with their own currencies instead of the US Dollar.
Central banks of the 2 countries agreed to set up a new swap line with their own currencies worth 5.8-T Won (20-B Dirham or US$5.4-B) to support trade settlement between Seoul and Abu Dhabi, the Bank of Korea (BOK) said in an e- mailed statement Sunday.
The contract will expire in 3 yrs, but it would be extended upon agreement when it matures, the BOK said.
South Korea has signed currency swap deals with some countries, including China, for trade settlement purposes, which will reduce its dependence on the US Dollar.
UAE is South Korea’s 5th-largest oil exporter, with Seoul’s Crude Oil imports from the Middle Eastern country taking up 9.3% of the total in Y 2012. Seoul’s overall imports from Abu Dhabi reached US$15.1-B last year, accounting for 2.9% of the total.
The move came just 1 day after South Korea and Indonesia agreed to sign a Won/Rupiah currency swap contract of US$ 10-B.
Under the contract, the 2 countries can exchange 10.7-T Won for 115-T Rupiah within 3 yrs. The swap line can be extended by agreement between the 2 sides.
Seoul and Jakarta said in a joint statement that the currency swap arrangement aimed to promote bi-lateral trade and further strengthen financial cooperation. Indonesia is South Korea’s largest trading partner among the 10-member Association of Southeast Asian Nations (ASEAN), with bi-lateral trade reaching some US$ 30-B in Y 2012.
Emerging economies in Asia, particularly Indonesia, suffered recently from a massive foreign capital exodus and its subsequent currency weakness caused by concerns over the paring of US bond purchases.
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