South Korea and the United States have agreed to extend a 60 billion dollar bilateral currency swap agreement by another three months through the end of this year.

The Bank of Korea(BOK) said on Thursday that it agreed with the U.S. Federal Reserve to extend the bilateral currency swap deal, which was due to expire on September 30. 

The latest agreement will extend the deal until December 31 of this year.

A BOK official said that the extension will contribute to maintaining stability in the local financial and foreign currency markets.  

The central bank added that it will provide the loans to local banks when needed. 

In March of last year, the BOK and the Fed signed the bilateral currency swap facility to help ease financial market jitters caused by the pandemic. The latest deal marks the third extension. 

A currency swap is a transaction whereby two parties such as banks or countries exchange an equivalent amount of money with each other but in different currencies to manage possible exchange rate risks.