The Federal Reserve on Thursday moved to quench the business world’s thirst for the U.S. dollar, by announcing it had set up temporary U.S. dollar swap lines with nine central banks in Asia, South America and Europe.
The new facilities will support $60 billion swap lines with the central banks of Australia, Brazil, South Korea, Mexico, Singapore and Sweden.
Lines of $30 billion were set for the central banks of Denmark, Norway, and New Zealand. The swap lines will last for 6 months.
The Fed already has swap lines with major industrial countries and the European Central Bank. There are now 14 separate swap lines with other central banks.
The dollar had been surging in foreign exchange trading as a result of high demand as the world’s reserve currency is used for most international trade and payments. This desperate dash was being blamed by analysts for amplifying the worldwide equity selloff and volatility across financial markets.
Swap lines give foreign central banks the capacity to deliver dollar funding to institutions in their jurisdictions during times of market stress, analysts said.
The Fed has been launching a series of emergency lending facilities to help the financial markets settle in the wake of the shock of how devastating the coronavirus pandemic would be for the global economy.