The European Central Bank (ECB), the Bank of England, the Bank of Japan and the Swiss National Bank are in consultation with the Federal Reserve are further reducing the frequency of their seven-day US dollar liquidity operations due to a lack of demand.
From 1 September, operations will be cut from three times per week to once per week.
The central banks will continue to hold weekly operations with an 84-day maturity.
In a recent statement the ECB described them as serving “as an important liquidity backstop to ease strains in global funding markets”.
These central banks highlighted that they “stand ready” to re-adjust the provision of US dollar liquidity as warranted by market conditions.
In the US the Federal Reserve recently said it was extending its temporary US dollar liquidity swap lines and the repo facility for foreign and international monetary authorities (FIMA repo facility) until 31 March 2021.
These facilities were established in March to ease strains in global dollar funding markets resulting from the COVID-19 shock and to mitigate strains on the supply of credit in the US and globally.
The FIMA repo facility and swap lines were expected to run until at least until October but the ongoing global financial disruption and fears of regional second waves of the coronavirus have required the Fed’s prolonged intervention.
