South Korea to supply another $3ob to markets

Seoul: South Korea may supply another $30 billion to banks, companies and currency-swap markets to help bolster liquidity, Yonhap News reported, citing government officials it did not identify.

The government is seeking to add the measure in a relief package that will be announced today, the Korean-language news agency reported.

The US financial crisis is making it more difficult for companies worldwide to secure dollars as banks hoard cash to meet their funding needs.

South Korea's currency and swap markets are experiencing a dollar shortage as local businesses, which expect the US currency to strengthen against the won, do not want to sell their dollars yet.

"Injecting more dollars will be good news for the whole South Korean financial market as its recent volatility came from a shortage of dollars," said Lee Sang Jae, senior economist at Hyundai Securities Co.

"But the measure will not fully solve problems until the US financial market is stabilised."

Under the proposal, the Bank of Korea may supply more than $10 billion in US currency to the local won-dollar swap market and the state-run Export-Import Bank of Korea may provide $20 billion to banks and small businesses, Yonhap reported. The government had already promised to supply a total of $15 billion to small firms and the swap market.

Change in rules

The Bank of Korea said on Friday it will change rules in the foreign-exchange swap market to increase banks' access to funds. The measure helped the won, which fell 9.7 per cent on October 16, the most since the International Monetary Fund bailed out the country in December 1997, to rebound.

South Korea's won has fallen 30 per cent this year, the worst performance among Asia's 10 most-traded currencies.