SEOUL, April 13 (Yonhap) -- South Korea and the United Arab Emirates (UAE) have renewed a currency swap deal to strengthen bilateral financial cooperation, the central bank here said Saturday.
The three-year deal, which went into effect earlier in the day, allows for the exchange of up to US$5.4 billion, equivalent to 6.1 trillion won and 20 billion dirham in local currencies, between the two central banks, according to the Bank of Korea (BOK).
BOK Gov. Lee Ju-yeol and his UAE counterpart Mubarak Al Mansoori signed the agreement the previous day in Washington D.C.,the BOK said.
The two sides signed the initial deal in 2013, but failed to extend the deal before it expired in 2016. Terms and details of the 2013 and 2019 contracts are identical, the BOK said.
"The BOK and the Central Bank of the UAE renewed their bilateral currency swap agreement, reaffirming their commitment toward promoting bilateral trade and financial cooperation between the two countries," the BOK said in a joint press release.
The renewed swap deal is to expire on April 12, 2022, and could be extended by consent from both sides.
A currency swap is a tool for defending against financial turmoil by allowing a country beset by a liquidity crunch to borrow money from others with its own currency.
The UAE is South Korea's second-largest export destination in the Middle East, with outbound shipments to the country reaching $4.59 billion in 2018. At the same time, Asia's fourth-largest economy imported $9.29 billion worth of goods from the UAE, mostly crude oil.
South Korea also has swap deals with China, Switzerland, Canada and Indonesia, worth a combined $132.8 billion.