Fed to End Dollar Swaps with Other Central Banks

Original Article from Seeking Alpha Dollar Currencies

The Prudent Investor submits:

I don’t know what it will mean for the value of Federal Reserve Notes (FRN) expressed in other unbacked fiat currencies, but the Fed will end its half trillion dollar swap trades with various other central banks (notably the ECB), the Wall Street Journal reports:

The Federal Reserve is on track to end a program, begun during the financial crisis, that provides U.S. dollars to institutions overseas through foreign central banks.
In the depths of the crisis, the Fed shipped more than $500 billion overseas through arrangements with other central banks, in exchange for their currencies. Such lending is down sharply and officials expect to end the program according to plan on Feb. 1.
As of January 13, the Fed held $5.9 billion in dollar "swap" agreements with foreign central banks, down from $63 billion in early September and $583 billion in late December 2008 as the financial crisis was worsening…
The Fed said in December it was "working with its central bank counterparties to close its temporary liquidity-swap arrangements by February 1." With the Fed’s next policy meeting coming on Tuesday, Jan. 26th, and Wednesday, Jan. 27th, it is likely to formally announce plans to shut the program down.

Given that the Fed has reduced its exposure to a few billion – what’s a billion in a world drowning in trillions of debt – this appears to be a rather technical matter.

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