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 USD15 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.
"While there is no need to use the facility right now, it is useful to have this capacity if markets become dysfunctional," Mr Spencer said.
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