April 6, 2009

US Dollar Weak, US Federal Reserve to trade currencies

POLITICS - The US dollar has become so weak that five central banks in Europe, Japan and the United States said today they have agreed currency swap lines that enable the Federal Reserve to provide euro, yen, sterling and Swiss francs to U.S. financial institutions.

Under the new agreement the Bank of England, the European Central Bank, the Swiss National Bank and the Bank of Japan would offer their domestic currencies to the Fed for lending to U.S. financial institutions, should the US dollar become 'not worth keeping'.

The swap lines, which are authorized until Oct. 30, will provide up to 30 billion British pounds, 80 billion euros, 10 trillion yen, and 40 billion Swiss francs to American companies.

"Central banks continue to work together and are taking steps as appropriate to foster stability in global financial markets," the Fed said in a statement. The four other central banks issued similar statements.

The U.S. Federal Reserve established reciprocal currency swap arrangements with the ECB and the Swiss central bank to provide mainly dollar funding in December 2007. The Fed made similar arrangements with the central banks of Canada, Britain and Japan in September 2008.

The US dollar is expected to continue sliding in value in 2009 and won't make a recovery until 2010.

See Also:
The Weak US Dollar

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