The $2 billion agreement, signed by the BOK and the Central Bank of the Republic of Turkey, aims to boost trade between the two nations.

"The Bank of Korea and the Central Bank of the Republic of Turkey today entered into a Korean Won-Turkish Lira bilateral swap agreement, effective immediately," the Bank of Korea said in a statement.

The swap agreement allows for the exchange of local currencies between the two central banks of up to KRW 2.3 trillion or TRY 17.5 billion, according to the statement.

"The effective period is 3 years from today and could be extended by mutual agreement between the two sides," the statement added.

In finance, a currency swap (more typically termed a cross-currency swap, XCS) is an interest rate derivative (IRD). In particular, it is a linear IRD, and one of the most liquid benchmark products spanning multiple currencies simultaneously. It has pricing associations with interest rate swaps (IRSs), foreign exchange (FX) rates, and FX swaps (FXSs). (ILKHA)