The Bank of Korea (BOK) offered $8.72 billion to banks Tuesday in its first round of dollar lending using a currency swap line with the United States Federal Reserve in a bid to stabilize the currency market.

The central bank held a 30-minute online auction to provide local banks and other financial institutions with $800 million in seven-day debt and $7.92 billion in 84-day loans.

Bids undershot the BOK target of $2 billion in seven-day debt and $8 billion in 84-day loans, which the central bank construed as showing a local dollar crunch has eased to a considerable extent.

Successful bidders will actually receive dollars on Thursday.

A BOK official said the dollar supply will help stabilize the currency market and that the central bank will auction off more dollars considering the market situation.

The South Korean currency closed at 1,217.40 won against the greenback on Tuesday, up 7 won from the previous session's close.

The money is the first batch of the BOK's $60 billion currency swap agreement signed with the US central bank on March 19, aimed at tackling a dollar crunch and a plunge in the local currency sparked by the spread of the coronavirus and a plunge in oil prices.

South Korea's latest deal with the Fed is the second of its kind. In 2008, South Korea signed the first currency swap deal with the US to cushion the country from the fallout from the global financial crisis.

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