SKorea to inject 10 billion dollars into forex swap market

SEOUL: South Korea Friday announced plans to pump at least 10 billion dollars into the foreign exchange swap market to ease dollar shortages, its largest intervention in the market for a decade.

The government will use its foreign exchange stabilisation fund to provide the money between now and mid-October, Choi Jong-Ku, head of the finance ministry's international finance bureau, told reporters.

It will be the biggest injection of dollar liquidity into the swap market since the stabilisation fund was created following the 1997 Asian financial crisis, he said.

"Since the US financial turbulence, the hardest-hit area here has been the foreign currency market," Choi said. "We will inject at least 10 billion dollars and more if necessary to help stabilise the market."

South Korea now has about 55 billion dollars in its stabilisation fund. Choi said total foreign currency reserves would stand at about 240 billion dollars at the end of September. He said the injection of dollars into the swap market could be retrieved after a certain period and would not drain reserves.

There are growing concerns that local companies and banks are having difficulty securing foreign capital since the collapse of Lehman Brothers sparked global fiscal turmoil.

Finance Minister Kang Man-Soo also said after talks with senior economic officials Friday that the government would take "preemptive steps" to stabilise markets.

Kang said it would soon take measures to help small and medium-size firms which are suffering losses arising from an option-related derivatives product for hedging currency risks.