what is a currency swap deal?
A currency swap is, literally, an exchange of a specified amount in one countrys currency with that of another. It is a foreign exchange transaction. The swap is done in cash. In the swap deal between Korea and the United States, the two countries are exchanging Korean won and U.S. dollars. This does not mean that they hold the money exchanged forever. At some point, they give the currencies back to each other. Currency swaps are contracts made between the central banks of both nations. So the swap deal this time was between the Bank of Korea and U.S. Federal Reserve Board. The amount of money that the two countries promised to exchange was $30 billion. That means Korea can give $30 billion worth of Korean won to the U.S. in exchange for $30 billion whenever necessary. The arrangement necessitates that you have a certain amount of Korean currency to swap for dollars. But that is not a problem because the Bank of Korea can issue the currency whenever needed. What made the swap deal nece
