China boosts FX swaps partnership with South Korea

China is showing positive signs of further liberalising its currency. Recently the worlds second largest economy opened up doors for Yuan forwards and is now boosting ties with South Korea.

South Korea and China have agreed to expand their currency swap agreement to the equivalent of $56.5 billion in the face of global uncertainty and financial turmoil.

The existing won-yuan swap arrangement reached in April 2009 was worth the equivalent of $33.5 billion at the current won-dollar Exchange Exchange An exchange is known as a marketplace that supports the trading of derivatives, commodities, securities, and other financial instruments.Generally, an exchange is accessible through a digital platform or sometimes at a tangible address where investors organize to perform trading. Among the chief responsibilities of an exchange would be to uphold honest and fair-trading practices. These are instrumental in making sure that the distribution of supported security rates on that exchange are effectiv An exchange is known as a marketplace that supports the trading of derivatives, commodities, securities, and other financial instruments.Generally, an exchange is accessible through a digital platform or sometimes at a tangible address where investors organize to perform trading. Among the chief responsibilities of an exchange would be to uphold honest and fair-trading practices. These are instrumental in making sure that the distribution of supported security rates on that exchange are effectiv Read this Term rate.

The central Bank of Korea (BoK) said its new deal with the People's Bank of China would last until October 25, 2014.

The agreement came a week after South Korea and Japan signed a deal to increase their currency swap agreement to the equivalent of $70 billion from $13 billion.

A currency swap allows central banks to exchange their currencies with each other in case of a Liquidity Liquidity The term liquidity refers to the process, speed, and ease of which a given asset or security can be converted into cash. Notably, liquidity surmises a retention in market price, with the most liquid assets representing cash.The most liquid asset of all is cash itself.· In economics, liquidity is defined by how efficiently and quickly an asset can be converted into usable cash without materially affecting its market price. · Nothing is more liquid than cash, while other assets represent The term liquidity refers to the process, speed, and ease of which a given asset or security can be converted into cash. Notably, liquidity surmises a retention in market price, with the most liquid assets representing cash.The most liquid asset of all is cash itself.· In economics, liquidity is defined by how efficiently and quickly an asset can be converted into usable cash without materially affecting its market price. · Nothing is more liquid than cash, while other assets represent Read this Term crunch.

The new swap deals will help South Korea secure extra liquidity in a worst-case scenario, even though its own foreign exchange reserves stood at $303.38 billion at end-September.

"This measure will help reduce a negative impact, caused by growing uncertainty in global financial markets, on the economies of the two countries," the BoK said in a statement.

Exchanges have also been opening doors to the export currency, CME group launched a Yuan denominated futures contract and SGX has started offering NDF's.

All eyes are on who will take the spot of the next Chinese premier, Li Keqiang a prominent candidate is known to have liberal economic reforms.

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