Rhee Chang-yong, the Bank of Korea governor, said on the 20th that the central bank has "never reviewed (signing a currency swap with the U.S. Treasury)."
Rhee gave the answer when Rep. Jin Sung-joon of the Democratic Party of Korea asked at a National Assembly Strategy and Finance Committee audit held at the Bank of Korea headquarters in Jung-gu, Seoul, whether it is possible for the U.S. Treasury and the Bank of Korea to sign a currency swap contract.
He said, "It seems you are talking about the Argentina case, but a currency swap is for short-term liquidity, so it is not used for long-term investment purposes (such as $350 billion)," adding, "I understand that the negotiating team this time is fully aware of the scale of foreign exchange we can supply annually (up to $20 billion) and is negotiating accordingly."
The U.S. Treasury, through its Exchange Stabilization Fund (ESF), can, when necessary, enter into currency swaps with foreign governments without going through the Federal Reserve or provide liquidity directly. The United States drew attention for the "Argentina method" when it supported about $20 billion in dollar liquidity during Argentina's foreign exchange crisis.
On a question related to expanding gold holdings, Rhee said it is not easy to purchase new assets such as gold when foreign exchange reserves are on a declining trend.
Rhee said, "Because we have been in a phase of reducing foreign exchange reserves through intervention over the past three years, we have not been able to expand the portfolio aggressively," adding, "If we move back into a phase of increasing foreign exchange reserves, there may be room to consider how to allocate assets."