SEOUL, Feb. 23 (Xinhua) -- South Korea and Australia have signed a currency swap agreement to help promote bilateral trade and trade settlement in local currencies even in times of financial stress, Seoul's central bank said Sunday.
Bank of Korea (BOK) Governor Kim Choong-soo and his Australian counterpart Glenn Stevens signed the currency swap deal Sunday in Sydney, the BOK said in a statement. The two central bank chiefs were staying in Sydney to attend the meeting of G20.
The deal will allow for the exchange of local currencies between the two central banks of up to 5 trillion won (4.5 billion U.S. dollars) or 5 billion Australian dollars for three years. The period could be extended by mutual consent of both sides.
"This agreement is designed to promote bilateral trade for the economic development of the two countries," the joint statement said. "In particular, the agreement will ensure that trade between the two countries can continue to be settled in local currency even in times of financial stress."
Australia is South Korea's seventh-largest trade partner, with bilateral trade reaching around 30 billion U.S. dollars in 2013. South Korea is Australia's fourth-largest trading partner.
Among 20.8 billion U.S. dollars, the value South Korea imported from Australia in 2013, natural resources such as iron ore and soft coal accounted for more than 80 percent.
The currency swap deal will allow South Korea to import commodities from Australia in a stable way amid rising volatilities in the global financial market after the U.S. Federal Reserve's tapering of its quantitative easing.
The South Korean government has sought to reach currency swap agreements with many other countries in a bid to reduce its dependence on the U.S. dollar for trade settlements.
South Korea has signed currency swap deals worth 120 billion U. S. dollars until now, with those with China, Japan, United Arab Emirates, Malaysia and Indonesia reaching 56 billion dollars, 10 billion dollars, 5.4 billion dollars, 4.7 billion dollars and 10 billion dollars respectively.