Breaking: Fed Says Central Banks Will Hold Daily Dollar Swap Operations

(C) Reuters.

By Geoffrey Smith

Investing.com — The Federal Reserve said it would increase the frequency of dollar swap operations agreed with other western central banks, further ratcheting up its efforts to ease a global shortage of dollars in financial markets.

“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 further enhance the provision of liquidity via the standing U.S. dollar liquidity swap line arrangements.

To improve the swap lines’ effectiveness in providing U.S. dollar funding, these central banks have agreed to increase the frequency of 7-day maturity operations from weekly to daily. These daily operations will commence on Monday, March 23, 2020, and will continue at least through the end of April. The central banks also will continue to hold weekly 84-day maturity operations.”

The news comes at the end of a week when the dollar has rocketed against both developed and emerging market currencies as investors around the world have sought safety in the world’s most liquid financial asset.

By 10.10 AM ET (1410 GMT), the dollar index was down 0.9% at 102.722, having risen ominously from intraday lows in the previous couple of hours. The dollar risen 4% against a basket of developed-market currencies this week, hitting a 17-year high at the worst of the squeeze in global markets.

EUR/USD was up 0.2% at $1.0712, while the pound was up 2.9% from a 35-year low at $1.1819. USD/JPY was up 0.1% at 110.79.