Federal Reserve opens up seventh liquidity facility, to supply US dollars abroad

Stresses in the U.S. dollar markets have pushed the Federal Reserve to open up a facility where foreign central banks can temporarily swap U.S. government bonds with greenbacks.

The Fed announced Tuesday morning that it would be establishing a repurchase agreement facility for foreign and international monetary authorities (FIMA) that have accounts at the central bank’s New York branch. Through the FIMA repo facility, other central banks and monetary authorities unable to make smooth trades in the open market will be able to temporarily liquidate their positions in Treasuries.

“[The FIMA facility] should also serve, along with the U.S. dollar liquidity swap lines the Federal Reserve has established with other central banks, to help ease strains in global U.S. dollar funding markets,” the Fed said in a statement.

As the coronavirus continues to grip markets around the world, the Fed had already opened up U.S. dollar swap lines with nine other central banks as companies and governments around the world scramble for dollars. All the while, the Fed has tried to maintain liquidity in the market for U.S. Treasuries by resuming its crisis-era policy of directly buying government debt of various maturities.

The FIMA repo facility is the seventh liquidity facility that the Fed has opened up  as it continues to battle the economic effects of the coronavirus.