The Federal Reserve will keep dollar "swap" lines open for nine mid-sized foreign central banks until Sept. 30, 2021, extending a program established early in the coronavirus pandemic to help ease global financial stress.
The ability to trade foreign currency for dollars at the U.S. central bank is permanently available to the European Central Bank and a handful of other major central banks.
In March, with the pandemic raising concerns about the need for dollar financing across the globe, the Fed set up $60 billion swap arrangements with the central banks of Australia, Brazil, South Korea, Mexico, Singapore and Sweden, and $30 billion lines with the central banks of Denmark, Norway and New Zealand.
The Fed also allowed an even longer list of central banks to get dollar loans provided they could post U.S. Treasury bonds as collateral.
The swap lines were among the initial tools the Fed deployed in March amid a series of emergency steps to battle the pandemic.
Unlike some of its lending programs for companies, which required approval and financing from the U.S. Treasury, swap lines fall under the Fed's core powers to keep financial markets stable. Because so much world trade and corporate borrowing is done in the U.S. currency, access to dollars is important to keep temporary crises from forcing companies out of business, and driving nations or regions into recession.
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