BOK denies report of trilateral currency swap discussion with China, Japan

The Bank of Korea (BOK) has denied discussing a trilateral currency swap with its counterparts in China and Japan, directly refuting a report published Wednesday by the South China Morning Post (SCMP).

However, a discussion is underway for extending the bilateral swap arrangement with China that expired on Oct. 10.

“Regarding the discussion of a trilateral currency swap, we understand that it is not true,” said Yoon Soo-hoon, head of the BOK's International Affairs Department’s Financial Cooperation Team. He added that such a discussion did not take place.

China has separate currency swap agreements with both Korea and Japan. The five-year Korea-China swap deal — worth 400 billion yuan ($56.16 billion) for China and 70 trillion won ($48.95 billion) for Korea — expired earlier this month but the negotiations to extend the agreement are “unfolding smoothly,” Yoon added.

Amid the unresolved U.S.-China trade conflict, the SCMP reported that China is in talks with Korea and Japan — two U.S. allies — “about a possible trilateral currency swap to bolster the region’s financial safety net and deepen economic cooperation,” citing a source familiar with the issue.  

Central bankers from the three countries discussed the issue on the sidelines of the IMF-World Bank annual meetings in Washington last week, the report said, adding that further discussions on cooperation may occur during the Association of Southeast Asian Nations (Asean) and Asia-Pacific Economic Cooperation summits.  

China has been seeking to increase the international use of the Chinese yuan in a bid to challenge the dominance of the U.S. dollar and promote a trilateral free trade deal with Korea and Japan.  

They signed the Chiang Mai Initiative, a regional financial arrangement among Asean states plus Korea, Japan and China, designed to address short-term liquidity challenges.  

BY JIN MIN-JI [[email protected]]