The Swiss National Bank makes another big move on the fed-swap line

Oct 13 (Reuters) – The Swiss National Bank withdrew nearly $6.3 billion from the US Federal Reserve’s currency swap line facility this week, about double the amount a week earlier, New York Fed data released on Thursday showed .

The SNB on Wednesday withdrew $6.27 billion in US currency for a seven-day tenor at an annualized rate of 3.33%. A week earlier, it pulled $3.1 billion at the same maturity and rate.

The two transactions were larger than any drawing the SNB made in spring 2020, when it and other central banks siphoned billions of dollars from the Fed during the global market panic that erupted in the early days of the coronavirus pandemic.

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The SNB is one of five foreign central banks with which the Fed has established permanent foreign exchange swap lines. They are also available to the European Central Bank, Bank of Japan, Bank of England and Bank of Canada, allowing those banks to deliver dollar-denominated funds to financial institutions in their own jurisdictions.

The ECB was the only other central bank to have a swap trade with the Fed this week. It drew $211.5 million from $206.5 million the week before but within range of the ECB’s typical weekly draw last year.

The swap lines tend to be underused during periods of calm markets. Their relatively limited use in recent weeks, as markets have been rocked by the Fed’s dovish policy in its fight against inflation and the BoE having had to intervene in a UK bond market roiled by the new Conservative government’s fiscal plans, has been scrutinized by analysts as noted an indication that markets, while choppy and sometimes thin, are not dysfunctional.

This week’s rise “is significant, but nowhere near the peak of an acute crisis,” Jefferies money market economist Thomas Simons wrote in a note to clients summarizing the Fed’s weekly balance sheet data.

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Reporting by Dan Burns Editing by Chris Reese

Our standards: The Thomson Reuters Trust Principles.

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