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Central banks around world move to boost flow of cash amid confidence concerns

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Top central banks, faced with the risk of a fast-moving loss of confidence in the stability of the financial system, have moved to bolster the flow of cash around the world.In coordination with central banks elsewhere, the US Federal Reserve offered daily currency swaps to ensure banks in Canada, Britain, Japan, Switzerland and the euro zone would have the dollars needed to operate.The change announced on Sunday is a modest expansion of an existing program in which the Fed each week pays dollars to other major central banks in exchange for local currency.

By doing so, the Fed, in effect offers low-risk short-term loans that ensure the world’s major economies have adequate supply of the global reserve currency to meet local demands.But the coordinated action on Sunday still struck a symbolic chord, echoing steps taken to offset the impact of the Covid-19 pandemic in 2020.

It was perhaps even more analogous to efforts undergird the system after the US housing market collapsed and stoked a global financial crisis and US recession from 2007 to 2009.The daily swaps, beginning on Monday and extending until at least the end of April, will “serve as an important liquidity backstop to ease strains in global funding markets, thereby helping to mitigate the effects of such strains on the supply of credit to households and businesses,” the Fed said in a statement.The central bank swap lines have shown little sign of crisis so far, with foreign central banks holding outstanding swaps with the Fed for only $472m as of 15 March, versus $446bn at the beginning of the pandemic and a peak of $583bn in 2008.But trouble among US midsized lenders as well as the announcement on Sunday of an emergency rescue of Swiss giant Credit Suisse Group

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