President Lee Jae-myung reportedly proposed a Korea-US currency swap agreement to US Treasury Secretary Scott Bessent, fueling speculation that a "big deal" may be in the works ahead of the June announcement of the first US investment project. The Korean government and Washington are currently engaged in behind-the-scenes negotiations over four to five US investment projects, including nuclear power and liquefied natural gas (LNG).
Government circles are analyzing the move as another instance of President Lee's signature "top-down" negotiation style. At the Korea-US summit held in Gyeongju last October, Lee requested during his live-broadcast opening remarks that the US permit the supply of nuclear fuel for nuclear-powered submarines, ultimately securing Washington's approval.
"Many of the projects the US is currently demanding lack commercial viability or are structured on terms unfavorable to Korea," an industry official said Friday. "It's possible that, in exchange for accepting some penalty, we requested a currency swap as a quid pro quo."
Lee Jung-hee, a professor of economics at Chung-Ang University, said, "While it may appear to have been a sudden proposal at the meeting, it was more likely one of the negotiation cards discussed in advance with aides rather than something impromptu." She added, "It appears to be a supplementary measure presented to ease concerns about US investment."
Korea and the US are currently locked in a tug-of-war over the selection of the first US investment project in June. Washington is seeking Korean participation in a project to build an LNG export terminal in Louisiana. The Louisiana project involves building infrastructure to liquefy natural gas produced in the Gulf of Mexico region in the southern US and export it to Europe and Asia. Since it would allow the US to sell more American gas, Washington has been strongly pressing Seoul for participation from the early stages of investment discussions.
The Korean government, on the other hand, prefers participation in nuclear projects, including small modular reactors (SMRs), in terms of commercial rationality. However, the prevailing view is that if US pressure intensifies, Korea will have no choice but to accept participation in the LNG export terminal project.
From this perspective, the currency swap card is largely characterized as a quid pro quo demanded of the US in exchange for Korea absorbing some commercial losses. Under the Korea-US strategic investment memorandum of understanding (MOU) signed last November, Korea is required to invest 150 billion dollars in shipbuilding and 200 billion dollars in strategic industries within President Donald Trump's term (through January 2029). The total amounts to approximately 523 trillion won, far exceeding half of the government's annual budget.
In particular, while the strategic industry investment has been capped at roughly 20 billion dollars per year, analysts point out it could become a potential source of supply-demand instability in the foreign exchange market. Large-scale dollar funding is needed for US investment, and with the won-dollar exchange rate recently approaching the 1,500 won level, Korea needs a foreign exchange market safety net such as a currency swap.
Some interpret the move as a strategic gambit to leverage the need for FX market stability as negotiating leverage, even if the currency swap is not actually concluded, to extract additional concessions from the US such as expanded participation by Korean companies or improved profit-sharing structures.
Cho Young-moo, head of the NH Financial Research Institute, said, "Since US investment requires the Korean government or companies to procure dollars, it is a factor pushing up the exchange rate from a supply-demand perspective." He added, "Concluding a currency swap would have the effect of easing concerns over exchange rate increases or raising expectations that the exchange rate level can be lowered."
Whether the US will accept Korea's request, however, remains uncertain. Currently, only five countries have currency swap agreements with the US: Japan, the eurozone, the United Kingdom, Switzerland, and Canada. While a 20 billion dollar currency swap was concluded with Argentina last year, that arrangement is closer to emergency funding in which the US Treasury lends money. A standing currency swap refers to a contract under which a foreign central bank borrows dollars from the US Federal Reserve using its own currency as collateral, and the Fed has maintained its position that such a measure is not necessary for Korea.
