Bank of Korea to Receive $4 Billion From Fed

By William Sim

Nov. 27 (Bloomberg) -- South Korea’s central bank will receive $4 billion from the Federal Reserve using their currency-swap line for the first time to provide U.S. dollars to local banks struggling to secure foreign funds.

The Bank of Korea will provide the funds to the banks via competitive bidding on Dec. 2 and plans to get more dollars from the Fed if necessary, it said in a statement in Seoul today.

The Fed agreed last month to provide $30 billion each to the central banks of Brazil, Mexico, South Korea and Singapore, expanding its effort to unfreeze money markets in emerging nations. South Korea is seeking to expand similar deals with China and Japan to help stabilize the local foreign-exchange market.

“It’s good news and will help stabilize the local currency market,” said Seo Chul Soo, a fixed-income analyst at Daewoo Securities Co. in Seoul. “It will be even better if we can expand the swap lines with China and Japan.”

South Korea posted a record current-account surplus in October, which may help ease pressure on the won, Asia’s worst- performing currency this year, the Bank of Korea said in a separate statement today.

The won has tumbled to near a decade low as foreign investors dump Korean stocks and bonds amid the global economic and financial crisis.

To contact the reporter on this story: William Sim in Seoul at wsim2@bloomberg.net