SINGAPORE – Singapore and Japan renewed an agreement on Friday (May 21) that allows the two countries to swap their own currencies in exchange for United States dollars in times of need.
The Bilateral Swap Arrangement (BSA) between the central banks of the two nations also enables Singapore to obtain Japanese yen to meet possible fund requirements, the Monetary Authority of Singapore (MAS) and the Bank of Japan said in a statement.
At the onset of the coronavirus pandemic last year, the US dollar became scarce – bringing transactions in the global financial system to a virtual halt.
Such temporary shortages have also marked previous episodes of instability, as the uncertainty tempts investors to hold US dollars that dominate global trade.
Eventually, the US Federal Reserve did step in to provide the much-needed currency.
However, central banks in Asia – and elsewhere – have been building up their own backup arrangements such as currency swaps.
Singapore inked its first currency swap deal with Japan in 2003.
It was upgraded to a two-way bilateral swap arrangement in 2005, under which both countries’ currencies can be exchanged for the greenback.
This is the third renewal of the swap arrangement.
Under the terms of the BSA, Singapore can swap local dollars for up to US$3 billion (S$4 billion) or its equivalent in Japanese yen from Japan.
Japan can swap Japanese yen for up to US$1 billion from Singapore.
The MAS said the size of the arrangement remains unchanged.