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The Fed and other major central banks used coordinated swap lines to provide more global US dollar liquidity as dollar funding markets came under stress from COVID-19. The piece describes how swap agreements work and reviews past crisis programs.
It also lists features countries consider when entering a swap line.
Swap lines ease dollar funding shortages that can force selling of assets and commodities. Stabilized dollar liquidity reduces the risk of a sudden dollar spike that would hurt dollar-priced commodities.
som.yale.eduMar 26, 2020After 41 past policy events, US Dollar (Broad) moved a median -0.2% over 5 sessions (44% higher; middle half -0.6% to +0.4%), and +0.3% over 20.
Moves of each commodity's benchmark from the last close before the event. Historical reads pool past events of the same kind; they describe what happened, not what will. Not investment advice.
Expanded central bank swap lines supplied dollar liquidity and reduced the scramble for dollars.
Coordinated central bank swap lines expanded dollar liquidity on the same date, easing the dollar funding squeeze and reducing safe-haven dollar demand.
