Major Central Banks Are Going to Cut Frequency of Dollar-Funding Operations, BOJ Claims

The Fed in March increased the frequency of 7-day maturity operations from weekly to daily as part of the swap line arrangements with the important central banks

Major central banks all over Europe and Japan are going to reduce the frequency of their seven-day dollar liquidity-providing operations from the start of July as the tensions in the market caused due to the coronavirus or COVID-19 pandemic has relaxed, the Bank of Japan stated on Friday.

In view of the improvements in US dollar funding conditions and following the consultation with the US Federal Reserve, the Bank of Japan, the Bank of England, the European Central Bank and the Swiss National Bank have jointly come to a decision of reducing the frequency of the seven-day operations from daily three times a week, the BOJ mentioned in a statement.

Major Central Banks to Reduce Frequency of 7-Day Operations

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The change will take effect on July 1, it said. "These central banks stand ready to re-adjust the provision of U.S dollar liquidity as warranted by market conditions," the statement said. "The swap lines among these central banks are available standing facilities and serve as an important liquidity backstop to ease strains in global funding markets," it said.

In a bid to address the market turbulence caused by the pandemic, the Fed in March increased the frequency of seven-day maturity operations from weekly to daily as part of its swap line arrangements with the major central banks. Dollars were in huge demand in March and supply was tight, but conditions have stabilized recently after a raft of measures taken by major central banks to ease market jitters over the fallout from the pandemic.

(With agency inputs)

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