ECB announces 28-day swap of dollars for euros

FRANKFURT: The European Central Bank announced on Tuesday a 28-day swap of dollars for euros as part of its exceptional efforts to get cash flowing though clogged interbank lending markets.

The ECB said it would charge a flat rate of 8.6 swap points, or 0.00086 dollars per euro for the transaction, which allows eurozone commercial banks to borrow dollars for just under a month by offering euros in return.

Under this swap transaction, the ECB will buy euros and sell an unlimited amount of dollars on Thursday, before reversing the transaction on November 20, a statement said. Details on how many dollars are requested by banks were to be released later in the day.

Eurozone banks need foreign currencies such as dollars and Swiss francs to finance lending, but the markets on which they trade have frozen up owing to mistrust that was fueled by and fed back into the international financial crisis.

The money markets determine the availability of credit for vast numbers of people around the globe, from managers trying to fund their businesses to families and students seeking mortgages and personal loans.