Fed sets up additional $30 bn currency swap facility

WASHINGTON: The Federal Reserve on Wednesday said that it has set up an additional $30 bn currency swap facility with central banks in Australia and Scandinavia, a move aimed at improving liquidity conditions in the global financial markets.

The Federal Open Market Committee has authorised the establishment of new swap facilities with the Reserve Bank of Australia, the Sveriges Riksbank (Bank of Sweden), the Danmarks Nationalbank (Bank of Denmark), and the Norges Bank (Bank of Norway), Federal Reserve said in a statement.

These new facilities would support the provision of $ dollar liquidity up to $10 bn each by the Reserve Bank of Australia and the Sveriges Riksbank and up to $5 bn each by the Danmarks Nationalbank and the Norges Bank, it said.

The temporary reciprocal currency arrangements (swap lines) has been established to address elevated pressures in US dollar short-term funding markets.

"These facilities, like those already in place with other central banks, are designed to improve liquidity conditions in global financial markets," it stated.

Central banks continue to work together during this period of market stress and are prepared to take further steps as the need arises.

Meanwhile, these new facilities represent a $30 bn addition to the $247 bn previously authorised temporary reciprocal currency arrangements with other central banks including European Central Bank ($110 bn), Bank of Japan ($60 bn), Bank of England ($40 bn), Swiss National Bank ($27 bn), and Bank of Canada ($10 bn).

These reciprocal currency arrangements have been authorised through January 30, 2009, it added.