With reports that the Korean government recently proposed concluding a currency swap with the United States, attention is focusing on whether it is feasible. Experts say that if a currency swap is concluded, it would increase domestic dollar liquidity and help ease exchange-rate instability, but they expect the United States has limited incentives to agree. However, ahead of carrying out investment in the U.S., there is also a counterargument that the possibility is not completely closed.

President Lee Jae Myung is reported to have requested the conclusion of a currency swap during a meeting on the 13th with U.S. Treasury Secretary Scott Bessent, who visited Korea. This reflects a shift in tone from about two months ago, when the government regarded the need for a currency swap as low.

A currency swap is a mechanism in which the central banks of two countries exchange their own currencies so that, in times of foreign-exchange stress, each can obtain the other’s currency for market supply.

Deputy Prime Minister and Minister of Economy and Finance Koo Yoon-cheol said at the National Assembly Special Committee on Investment in the U.S. on March 4, “Our foreign-exchange reserves are above $400 billion, and if we include the private sector, we hold over $1 trillion in foreign assets,” expressing the view that the need for a currency swap is not great.

However, as domestic and external conditions remain challenging, the mood appears to have shifted. The government is soon set to implement roughly $350 billion in investment in the U.S. that it pledged during tariff negotiations with Washington. On top of this, the won·dollar exchange rate has again moved above the 1,500-won level, stoking a sense of alert. On the 15th, the won·dollar exchange rate rose intraday to 1,507.7 won. According to the Bank of Korea, as of end-March, foreign-exchange reserves stood at $423.66 billion, down $3.97 billion from the previous month, the largest decline in 11 months.

The government expects that concluding a currency swap would first help soothe market anxiety. It could also work positively for executing investment in the U.S. Of the $350 billion, Korea committed to invest $200 billion in cash in projects designated by the U.S. government. If stable dollar funding conditions are secured, the burden of executing the investment could be reduced.

Experts see the likelihood that the United States will conclude a currency swap with Korea at this point as not high.

Choi In, emeritus professor in the Department of Economics at Sogang University, analyzed, “The main purpose for which the United States concludes currency swaps is to prevent the spread of a global financial crisis,” adding, “It is hard to see the current situation as a crisis of that magnitude, and the practical benefits for the U.S. are not significant.”

Woo Seok-jin, professor in the School of Economics·Statistics at Myongji University, also said, “In the past, currency swaps were a measure to prevent severe losses when U.S. investors had to pull assets out of Korea while the dollar’s value was surging,” and added, “At present, Korea is earning dollars through exports such as steel and semiconductors, so the United States is unlikely to judge the situation as a crisis.”

The United States has concluded currency swaps with various countries in large-scale crisis situations such as the 2008 global financial crisis and the 2020 COVID-19 pandemic. It has also preferred, rather than striking a swap with a single country, to include multiple countries with significant financial-market influence at the same time. In both 2008 and 2020, it concluded swaps with multiple countries, including Korea, Australia, Singapore, and Mexico. Korea concluded currency swaps worth $30 billion in 2008 and $60 billion in 2020.

Still, some say the door is not completely closed. On the 24th of last month (local time), Secretary Bessent suggested on X that the United States might strategically expand its swap network, stating, “Expanding permanent swap lines could be the starting point for building new dollar funding centers in the Gulf and Asia.” This is interpreted as an attempt to keep in check the growing international influence of China’s yuan. The United States currently maintains standing currency swap lines with five counterparts: the European Union (EU), the United Kingdom, Switzerland, Japan, and Canada.