The Fed to supply $15 bln swap line with New Zealand

The Federal Reserve announced Tuesday that it will supply New Zealand's central bank with up to $15 billion, part of an ongoing effort by the Fed to break through a global credit clog.

Under the new "swap" arrangement, the Fed will provide dollars to the Reserve Bank of New Zealand in exchange for that country's currency.

The Fed said in a statement that its policy-setting Federal Open Market Committee authorized the reciprocal currency arrangement with the Reserve Bank of New Zealand through April 30, 2009.

"This facility, like those already established with other central banks, is designed to help improve liquidity conditions in global financial markets," the Fed said.

"While there is no need to use the facility right now, it is useful to have this capacity if markets become dysfunctional," Reserve Bank of New Zealand Deputy Governor Grant Spencer in a statement posted to the bank's website.

The Fed has set up numerous swap lines with central banks around the globe to allow those central banks to provide U.S. dollars in their respective markets.

All of these swaps initially had upper limits, but on Oct. 13, the Fed erased the limit on its swap lines with the European Central Bank, Bank of England and Swiss National Bank. The next day, it erased the cap on its swap line with Japan.

The Fed also has swap lines with the central banks of Canada, Norway, Australia and Sweden.

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Sources :

1. Money CNN: Fed to supply $15B to New Zealand's central bank, October 28, 2008: 07:08 PM ET
2. Reuters: UPDATE 1-US Fed sets $15 bln swap line with New Zealand, October 28, 2008 06:28pm EDT

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