South Korea and Indonesia have agreed to sign a won-rupiah currency swap deal worth $10 billion, a move aimed at strengthening financial cooperation between the two countries, the finance ministry here said Sunday.
The agreement was made between South Korea's Finance Minister Hyun Oh-seok and his Indonesian counterpart during a meeting in Washington on Saturday. Hyun is there to attend the annual meetings of the International Monetary Fund and the World Bank.
"The currency swap line is aimed at boosting bilateral trade and financial cooperation between the two countries," the ministry said in an emailed press release.
"In the face of deepening global economic uncertainty, both sides expect the currency swap line will help stabilize regional financial markets and strengthen economic and financial cooperation between the two countries," it added.
The currency swap line will expire in three years and it could be renewed if both sides agree, according to the ministry. Central banks of the two will officially sign a deal for the swap line "sooner or later," it said.
The two countries also agreed to use the currency swap line in settling payments linked to their bilateral trade, a move they expect would reduce their dependence on the U.S. dollar.
The agreement came as emerging countries including Indonesia are struggling to curb excessive cross-border capital outflows and currency weakness, sparked by growing speculation over the U.S. monetary tapering.
In an interview with Yonhap on Sept. 26, Indonesia's Coordinating Minister for Economy Hatta Rajasa said that a won-rupiah swap facility is likely to serve as "the second line of defense" if clinched. (Yonhap News)