The Reserve Bank of New Zealand has set up a US$15 billion reciprocal swap facility with the US Federal Reserve to give New Zealand's banks access to US dollars if necessary. The temporary facility is set to expire in April next year. Reserve Bank Deputy Governor Grant Spencer said the facility was being created to address ongoing elevated pressures in US dollar short-term funding markets. "While there is no need to use the facility right now, it is useful to have this capacity if markets become dysfunctional," Spencer said in a statement. The US Federal Reserve set up a similar facility with the Reserve Bank of Australia last month for US$10 billion and has since tripled it to US$30 billion. Here is the full statement below from the Reserve Bank.
The United States Federal Reserve and the Reserve Bank of New Zealand today announced the establishment of a temporary reciprocal currency arrangement (swap line) to address ongoing elevated pressures in US dollar short-term funding markets. The Federal Open Market Committee has approved the Reserve Bank's request for a swap facility that will support the provision of US dollar liquidity to the New Zealand markets in amounts of up to US$15 billion. This reciprocal currency arrangement has been authorized through to 30 April 2009. Reserve Bank Deputy Governor Grant Spencer said the facility, like those already established between the Fed and other central banks, is to provide an additional source of liquidity for the US dollar funding market. The Reserve Bank of New Zealand has set up a US$15 billion reciprocal swap facility with the US Federal Reserve to give New Zealand's banks access to US dollars if necessary. Reserve Bank Deputy Governor Grant Spencer said the facility was being created to address ongoing elevated pressures in US dollar short-term funding markets. "While there is no need to use the facility right now, it is useful to have this capacity if markets become dysfunctional," Spencer said in a statement.
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