South Korea, US Hold First Finance-Central Bank 2+2 Talks; Currency Swap Not Discussed

Senior finance and monetary officials from South Korea and the US held their first-ever 2+2 meeting to discuss recent economic conditions and ways to expand bilateral economic and financial cooperation. The closely watched issue of a South Korea-US currency swap was not discussed at the meeting, according to people familiar with the matter.

South Korea’s Ministry of Economy and Finance said on Oct. 16 that Deputy Prime Minister and Finance Minister Lee Hyung-il, Bank of Korea Governor Shin Hyun-song, US Deputy Treasury Secretary Francis Brook and Federal Reserve Chair Kevin Warsh held the “South Korea-US Finance and Monetary Authorities 2+2 Meeting” at the Queen Sirikit National Convention Center in Bangkok.

It was the first time that four senior officials from the two countries’ finance ministries and central banks had met in a 2+2 format. The talks took place on the sidelines of the annual meetings of the International Monetary Fund and the World Bank, as well as the Group of 20 finance ministers and central bank governors meeting. Lee called the four-way talks especially meaningful because it was the first time the two countries’ finance ministries and central banks had met together in this format.

The officials exchanged views on the global economy and on ways to strengthen economic and financial cooperation between the two countries. Market participants said the talks were also likely to have covered South Korean investment in the US, foreign-exchange market stability and broader economic cooperation. South Korea and the US had earlier confirmed a $22.3 billion gas combined-cycle power plant project in Texas as the first South Korean investment project in the US. They also reached a broad agreement on a plan to build eight nuclear reactors in the US with $120 billion of investment.

As South Korean investment in the US gathers pace, demand for dollars stands to rise, adding upward pressure on the won-dollar exchange rate. The two sides also reviewed the impact of those investments on the foreign-exchange market and discussed policy coordination to ease sharp volatility, the people said.

The currency swap issue was not discussed at the meeting, the people said. Since 2013, the Fed has operated standing currency swap lines with five central banks: the European Central Bank, the Bank of Japan, the Bank of England, the Bank of Canada and the Swiss National Bank. Market participants say adding South Korea would be difficult because the standing facilities have been used selectively to support stability in global dollar funding markets. Another concern is that, with the won recently falling against the dollar, a swap agreement could accelerate strength in the Korean currency. That could affect exporters’ price competitiveness. In Seoul trading, the won was at 1,331.4 per dollar as of 3:30 p.m. on Oct. 16, up 13.2 won from the previous session. That was the lowest won-dollar exchange rate since Oct. 2, 2024, when it stood at 1,319.3 per dollar.

Some market participants said personal ties between Shin and Warsh also helped pave the way for the meeting. The two men both serve on the board of the Bank for International Settlements and are known to stay in close contact.

Kim Ik-hwan, Hankyung.com reporter lovepen@hankyung.com