S.Korea, UAE renew currency swap deal for 5 years

The central banks of South Korea and the United Arab Emirates (UAE) had renewed their currency swap deal for five years, the Bank of Korea (BOK) said Wednesday.

The bilateral currency swap agreement, which was originally signed in October 2013, was renewed by the BOK and the Central Bank of the UAE to reaffirm their commitment to promote bilateral trade and financial cooperation, the BOK said in a statement.

The agreement will allow the exchange of local currencies between the two central banks worth up to 6.1 trillion won (5 billion U.S. dollars) for 20 billion dirham or vice versa for the next five years.

The agreement, which came into effect on Wednesday, could be extended by mutual consent.

The currency swap deal is used to defend against a possible liquidity crunch by borrowing money denominated in the currencies of other countries in exchange for money in a local currency.

South Korea currently holds currency swap accords with seven other countries, including China, Australia and Canada.