No panic in Europe’s trading day:
Global Central Banks’ Daily Swap Lines Signal No Dash for Dollar
# Global Central Banks’ Daily Swap Lines Signal No Dash for Dollar
Swap lines, first used extensively during the 2007-2008 financial crisis, are temporary lending facilities that allow central banks around the world to borrow dollars from the Fed in exchange for an equivalent amount of their local currencies. The aim is to meet the needs of companies and financial institutions rushing for dollars.
In March 2020, the Fed and other major central banks activated the program as demand for the dollar surged. Sunday’s decision to dial up the frequency from weekly to daily operations echoes policymakers’ response then. The ECB’s $5 million takeup compared to $469.5 million of bids in its last weekly operation, signaling no dash for dollars.
The $5 million ECB bid “seems more like someone was testing the system than actual liquidity need,” said Piet Christiansen, chief strategist at Danske Bank A/S.