South Korean President Lee Jae-myung meets with U.S. Treasury Secretary Scott Bessent at the presidential office in Seoul to discuss bilateral financial cooperation and currency market stability. / Courtesy of the Presidential Office of South Korea
Lee Jae-myung has officially raised the need for a Korea-U.S. currency swap agreement during talks with Scott Bessent, as rising geopolitical tensions in the Middle East and growing dollar demand heighten concerns over foreign exchange market volatility.
According to the presidential office and related government agencies, President Lee discussed bilateral financial cooperation with Bessent during a meeting held at the presidential office on May 13. During the talks, Lee reportedly emphasized the need to resume a currency swap arrangement between South Korea and the United States to secure stable dollar liquidity.
The issue has gained urgency as the South Korean won continues to weaken sharply against the U.S. dollar. The won-dollar exchange rate recently approached the 1,500 won level during intraday trading, intensifying market concerns over financial instability amid prolonged Middle East conflict risks and a broader strengthening of the U.S. dollar.
Government officials are also increasingly concerned that large-scale outbound investments by Korean companies into the United States could further increase dollar outflow pressures. In particular, the planned launch next month of a Korea-U.S. Strategic Investment Corporation is expected to accelerate investment demand from Korean firms across sectors including semiconductors, batteries, and artificial intelligence.
Officials estimate that the initiative could eventually lead to annual capital movements worth tens of billions of dollars, increasing the need for stable dollar funding mechanisms.
A currency swap agreement allows central banks to exchange currencies to provide foreign exchange liquidity during times of market stress. Such arrangements are widely viewed as a financial safety net during crises.
South Korea previously signed a $30 billion currency swap agreement with the United States during the 2008 global financial crisis, which helped stabilize local financial markets. In 2020, during the COVID-19 pandemic, the two countries also established a temporary $60 billion swap line that eased market volatility and improved dollar liquidity conditions.
President Lee had reportedly discussed the issue with Bessent previously during a meeting in New York on the sidelines of the United Nations General Assembly last year. In interviews with foreign media at the time, Lee warned that large-scale dollar outflows without adequate safeguards could potentially trigger financial shock conditions comparable to a foreign exchange crisis.
Market experts say that a renewed currency swap agreement with the United States would likely help stabilize foreign exchange markets while improving confidence among overseas investors. Analysts believe such a deal could reduce the risk of foreign capital outflows and ease volatility in domestic financial markets.
However, uncertainty remains over how actively the United States would pursue negotiations. Washington has historically operated currency swap arrangements selectively, mainly during periods of severe global financial stress.
As a result, market attention is now focused on whether practical negotiations between financial authorities in both countries will move forward in the coming months.
Kim Min-jee
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