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Central banks dole out cash as bailout doubts grow
(Agencies)
Updated: 2008-09-26 15:10 The Reserve Bank of Australia (RBA) launched its first ever repurchase operation in US dollars and all $10 billion on offer was hungrily snapped up at 3.165 percent, well above the minimum bid rate of 2.35 percent. The RBA established a US dollar swap line with the Federal Reserve earlier in the week, aimed at meeting strong demand for US dollars during Asian trading hours. In South Korea, the Finance Ministry said it would inject $10 billion or more into the local swap market until the middle of October to stave off persistent dollar funding shortages. South Korea's central bank said it would skip its weekly bond auction next Monday, a move widely seen as aimed at keeping the local money markets flush with liquidity. Traders in the local money market say there were around 4 trillion won ($3.5 billion) worth of monetary stabilisation bonds due to mature next week. The RBA and the Bank of Japan also kept adding extra cash to their own banking systems on Friday, while Vietnam lifted the rate it pays on bank reserves to reduce the cost of borrowing. Yet these sums paled into insignificance compared to the US Federal Reserve's largesse. Figures released late Thursday showed US institutions borrowed from the Fed $188 billion per day on average in the latest week, almost four times the previous record. "The scale of the Fed's direct support for the financial system escalated dramatically this week," said Lou Crandall, chief economist at Wrightson ICAP, in a note to clients. |
