SEOUL - SOUTH Korea gained access to new sources of foreign exchange to help fend off the global credit crunch, with its central bank on Friday announcing expanded currency swap agreements with Japan and China.

The South Korean and Japanese central banks expanded a bilateral swap facility to the equivalent of US$20 billion (S$29.9 billion), the Bank of Korea said in statement. The bank also announced a deal with China worth about US$26 billion.

South Korea has moved to expand its access to foreign exchange as international credit markets have tightened amid the world financial crisis. The country's banks have faced difficulty in rolling over international debt amid a dollar shortage.

The agreements come a day before the leaders of South Korea, Japan and China were to meet in Fukuoka to discuss the global financial turmoil.

The Bank of Korea said that the won-yen agreement with Japan expands an existing one worth about US$3 billion. The increase will be effective through the end of April next year, the BOK said.

'The Bank of Korea believes that this action will mitigate adverse influences of the global financial turmoil on the two sound and well-managed economies and contribute to securing stability in regional financial markets,' the central bank said.

Under the deal with the People's Bank of China, the Bank of Korea can access up 180 billion Chinese yuan (S$39.3 billion) while China can get up to 38 trillion South Korean won (S$42.4 billion) for three years, though it could be extended.

'The two sides have agreed to explore the possibility and extent of converting swap currencies into reserve currencies,' the statement said, suggesting they could allow conversion into dollars or other major currencies.

The two central banks currently have a separate swap agreement worth US$4 billion.

The Bank of Korea reached an arrangement with the U.S. Federal Reserve in October, giving it access to up to US$30 billion, some of which it has already used.

South Korea has been dipping into its trove of foreign currency reserves to pump liquidity into the financial system amid the world financial crisis.

The country's reserves, which totaled US$200.51 billion at the end of November, have been declining steadily this year.

The bank is also believed to have used the reserves to try and stem a steep fall in the country's currency. -- AP