[Asia Economy New York=Correspondent Baek Jong-min] The United States central bank, the Federal Reserve (Fed), has initiated additional dollar liquidity supply by providing dollars in exchange for US Treasury bonds held by central banks of various countries.
This measure is interpreted as an effort to prevent turmoil in the bond and financial markets by allowing central banks in need of dollar liquidity to secure dollars without having to sell their US Treasury bonds or other assets. As a result, the dollar value reversed to a weaker trend on the day.
On the morning of the 31st (local time), the Fed announced in a statement, "We are establishing a temporary repurchase agreement facility (FIMA Repo Facility) to support the smooth functioning of financial markets, including the US Treasury market."
This is an expansion of the repurchase agreement transactions currently conducted by the New York Fed to foreign central banks. Foreign central banks or international monetary organizations that have 'FIMA accounts' at the Federal Reserve Bank of New York can provide their US Treasury bonds as collateral and borrow dollar cash. The implementation period is from April 6 for at least six months, but considering the Fed's recent aggressive stance, an extension is also anticipated.
On the 15th, the Fed lowered the existing currency swap rates by 0.25 percentage points with the European Central Bank (ECB), Bank of Canada, Bank of England, Bank of Japan, and Swiss National Bank, and on the 19th, it signed currency swap agreements with nine central banks including the Bank of Korea (BOK), but the dollar value still remains above pre-crisis levels.
On this day, the dollar index, which shows the dollar value against major currencies, recorded 98.955, down 0.32% from the previous day. The dollar index had stayed around 94 on the 9th but surged to 103.6 on the 19th as dollar liquidity rapidly deteriorated.
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