Fed arranges swap deals to smooth liquidity

The deals will allow the ECB to draw up to $50 billion, the Bank of England $30 billion and the Bank of Canada $10 billion from the Federal Reserve Bank of New York, in exchange for the Fed receiving euros, sterling and Canadian dollars of the same amount.

Many large banks have had their operations disrupted due to the attacks on the World Trade Center on Tuesday, which also rendered many brokers inoperative. The disruption led to fears that banks would be unable to find the currency requirements to close up their trade positions without taking large currency risks – and already thin market open currency trading would serve to drive up the price of the dollar. The swap arrangement will enable the European and Canadian central banks to lend dollars to banks unable to obtain dollar funding without added risk.

All three temporary swap facilities will last for 30 days.