SEOUL (BLOOMBERG) - Days before a troop-funding deal was set to expire, the United States has dropped its demand that South Korea pay five times more to host its military personnel after receiving assurances Seoul would purchase more American weapons, a newspaper report said.

The Trump administration also likely eased up after South Korea indicated it would step up its presence in the Strait of Hormuz, helping US efforts to protect oil flows in the region, South Korea's Chosun Ilbo newspaper reported on Thursday (Dec 26), citing an unidentified diplomatic source. The increase now may be about 10-20 per cent above the current level of nearly US$1 billion (S$1.35 billion), it said.

South Korea's foreign ministry declined to comment on the report.

Last month, US negotiators walked out of a meeting on troop funding in Seoul after South Korea baulked at the fivefold increase, seen as exorbitant by many in the country. The breakdown at that time raised questions about one of the US' closest military alliances and a key piece of the Pentagon's strategy for countering North Korea and a rising China. The two sides resumed talks in December.

Even though the deal known as the Special Measures Agreement technically expires at the end of this year, both sides are likely to agree to some sort of temporary extension as they negotiate, allowing for the continued operations of the about 28,500 US military personnel positioned on the peninsula.

The talks with South Korea could affect other countries that host US troops, as the Trump administration is seeking funding increases from other American allies.

Mr Trump, arguing that South Korea is rich and should pay more for US protection, has demanded Seoul contribute about US$5 billion for hosting US troops. The price tag originated with the White House, according to people familiar with the matter, and administration officials justify it by saying it reflects the costs South Korea would incur if it takes operational control of combined US-South Korean forces in the case of a conflict.

The request for more money hasn't sat well in South Korea, where many in President Moon Jae-in's progressive camp and opposition conservatives have come out against the demands.

Mr Moon, facing a sagging support rate, may not want to make any major concessions that further dent his popularity ahead of an election for Parliament next year.