The Bank of Korea (BOK) said Tuesday that it will offer $4.41 billion to local banks this week in its second round of dollar funding using its bilateral currency swap arrangement with the US Fed that is designed to help prevent a foreign exchange liquidity crunch.

The central bank held an online auction to provide up to $8.5 billion in seven-day debt and 84-day loans.

Bids undershot the BOK target of $7 billion in 84-day loans and $1.5 billion in seven-day loans.

"A total of $4.41 billion has been sold as the result of bidding," the BOK said in a statement. The central bank construed this as showing a local dollar crunch has eased to a considerable extent.

Successful bidders will actually receive dollars on Thursday.

The BOK delivered $8.72 billion last week in its first injection of US dollars using the US currency swap line.

The bilateral currency swap arrangement, signed late March, is worth $60 billion.

The local currency began to fluctuate against the US greenback early February when South Korea began to report a mass number of daily COVID-19 infection cases.

The won-dollar exchange rate dipped to a 10-year low of 1,285.70 won per dollar on March 19, sharply down from 1,158.10 won per dollar posted Jan. 20, the day South Korea reported its first confirmed case of COVID-19.

The local currency closed at 1,229.30 won against the dollar on Monday. (Yonhap)