South Korea and the United States have agreed to extend their $60 billion currency swap agreement by another three months through Dec. 31, which was signed to help ease market uncertainties caused by the COVID-19 pandemic, the Bank of Korea (BOK) said Thursday.

The BOK and the Federal Reserve reached an agreement to extend the bilateral currency swap deal, which was due to expire on Sept. 30, after extending it twice since it went effect in March 2020 to ease financial jitters caused by the pandemic.

"The extension of the bilateral currency swap is expected to help stabilize the domestic currency and financial market," the BOK said in a statement.

The BOK said that when needed, it will provide dollar-denominated loans to local banks via bidding by tapping the currency swap line.

The BOK had supplied a combined $19.87 billion to banks by using the swap arrangement between March and May last year.

The BOK said it repaid the $19.87 billion to the Federal Reserve on July 30 last year.

The latest currency swap deal marked the second of its kind signed with the US after a won-dollar swap line signed in October 2008 at the height of the global financial crisis.

South Korea currently has bilateral currency swap arrangements with eight countries, including Australia, Canada and China. (Yonhap)