The Federal Reserve and five other central banks around the world announce coordinated effort to make it easier for banks to trade in US dollars.
“The Bank of Canada, the Bank of England, the Bank of Japan, the European Central Bank, the Federal Reserve, and the Swiss National Bank are today announcing a coordinated action to enhance the provision of liquidity via the standing US dollar liquidity swap line arrangements,” the central banks said in a joint statement. Sunday’s statement came just hours after Swiss authorities orchestrated an emergency takeover of Credit Suisse by UBS.
Swap lines are agreements between two central banks to exchange currencies. They allow a central bank to obtain foreign currency from the central bank that issues it, and distribute it to commercial banks in their country. The swap line between US Federal Reserve and the ECB, for example, enables the ECB to receive US dollars in exchange for an equivalent amount of euros. The ECB can then distribute those dollars to commercial banks in the 20 countries that use the euro.
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