The Bank of England, the Bank of Japan, the European Central Bank and the Swiss National Bank said Tuesday that they would end daily measures to boost the flow of US dollars to lenders around the world. They cited “improvements in US dollar funding conditions” and “low demand” at recent operations aimed at providing liquidity. Starting May 1, those operations will once again be held weekly, a decision made in consultation with the US Federal Reserve, the primary source of dollars.
That meant making greater use of dollar swap lines, or agreements between the Fed and other central banks to provide dollars in exchange for, say, euros or yen. Swap lines are a key instrument in central banks’ toolbox aimed at preserving financial stability and keeping credit flowing to households and businesses. During the 2008 global financial crisis, European banks struggled to obtain US dollars as funding dried up from investors with limited appetite for risk.