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 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 crunch.

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