*

KOSPI index hits record high, Hyundai and Kia shares surge

*

South Korea seeks currency swap line to mitigate market

impact

of investment package

*

U.S. Treasury Secretary expects trade deal announcement

within

10 days

(Adds comments from national security adviser, trade official,

market reaction; paragraphs 6-9)

By Jihoon Lee

SEOUL, Oct 16 (Reuters) - South Korea's chief

presidential policy adviser said on Thursday he was "optimistic"

about talks to finalise a trade deal with the U.S., the latest

remark by an official pointing to progress in negotiations that

helped fuel an auto-led stock market rally.

Kim Yong-beom and Industry Minister Kim Jung-kwan spoke to

reporters before departing for the United States. They will be

joining Finance Minister Koo Yun-cheol and Minister for Trade

Yeo Han-koo for follow-up negotiations in Washington.

Kim's comments echo Minister Koo's remarks earlier this week

that there was "huge progress" and Foreign Minister Cho Hyun

saying there were "positive signals" in reaching a deal.

On the U.S. side, Treasury Secretary Scott Bessent said on

Wednesday the countries were close to finalising a trade deal

and he expected an announcement in the next 10 days. Seoul has

been seeking to reach a deal by late October when U.S. President

Donald Trump is due to visit the country for an Asia-Pacific

summit.

Seoul has been concerned over the foreign exchange

implications and the structure of a $350 billion investment

package included in a preliminary deal reached in late July. It

has asked Washington for a safeguard, such as a currency swap

line, to prevent any currency market impact, along with other

measures to guarantee "commercial feasibility".

South Korea's benchmark KOSPI stock index rose 2.5%

to a record high on Thursday. Shares of Hyundai Motor ( HYMLF )

surged 8.3% to a one-year high and sister automaker

Kia jumped 7.2% on hopes of a cut in auto tariffs,

to 15% from 25%, promised in the July deal.

"There was some response from the U.S. about foreign

exchange risks, but more work is still needed on a bigger

framework and the text of the agreement," a trade official said.

Wi Sung-lac, South Korea's top national security adviser,

clarified at a briefing held later in the day that there was no

progress in discussions with the U.S. Department of the Treasury

about setting up a currency swap.

"Even if it is set up...there also have to be sufficient

conditions, but no progress has been made in that area," Wi

said, amid local media reports that various tools were being

discussed for a currency safeguard.

Kim Jin-wook, an economist at Citi, said in a report that

the odds of a partial compromise after a prolonged deadlock

appeared to have risen with three conditions.

The conditions are faster-than-expected timing for

reaching a deal, no change in the headline figure of $350

billion and a form of safeguards to mitigate currency risks

instead of an unlimited central bank dollar swap line, Kim said.