SEOUL, June 24 (Yonhap) -- South Korea and Japan have decided not to extend the soon-to-be-expired won-yen swap facility worth US$3 billion, Korea's central bank said Monday.
The Bank of Korea (BOK) said it and its counterpart in Japan have reached a decision to end the swap line, due on July 3, amid speculation that the strained relations between Seoul and Tokyo may affect the decision.
The decision means Korea and Japan only have to hold the $10 billion currency swap line under the Chiang Mai Initiative, which is aimed at cushioning regional currencies from global turmoil.
At the height of the 2008 global financial crisis, the BOK agreed with the Bank of Japan to expand its won-yen swap facility to $20 billion from $3 billion.
They expanded the total swap line temporarily to $70 billion in 2011, leading Seoul to exchange its own currency with safer assets such as the dollar and the yen.
But later, the amount returned to $13 billion last August when tensions between the two countries heightened over South Korea's easternmost islets of Dokdo.
Japanese media said earlier this month that Tokyo would not extend the currency swap contract unless Seoul asks for its extension.
A senior official at the finance ministry earlier said that whether to extend the swap line is a matter of bilateral financial cooperation, not something that has an impact on the local financial markets.
