, Pound steadies as Fed moves to ease global dollar demand, Saubio Making Wealth

Pound steadies as Fed moves to ease global dollar demand

Pound and dollar currencyImage copyright Getty Images

The US central bank has moved to ease global currency strains as concerns about a global recession prompt a surge in demand for the US dollar.

The Federal Reserve said on Thursday it had established swap lines to supply central banks in nine countries with dollars.

The countries include Brazil, Norway, and Australia.

The dollar had earlier hit a three-year high against the euro, while rising to a 30-year high against the pound.

The new swap lines add to arrangements the Fed already has with central banks elsewhere, including the Bank of England and European Central Bank.

The Fed said they would be in place for at least six months and make available up to $450bn.

“These facilities… are designed to help lessen strains in global US dollar funding markets, thereby mitigating the effects of these strains on the supply of credit to households and businesses both domestically and abroad,” the Fed said.

The coronavirus pandemic has caused major turmoil in global markets as investors grow more concerned about its economic effects, dumping stocks and other more risky assets in favour of the dollar.

The main US indexes, down about 1% in morning trade on Thursday, are currently trading about 30% below their recent highs.

In London, the FTSE 100 share index of top firms has retreated to levels last seen in 2012. The index was down more than 1% on Thursday, while the FTSE 250 fell more than 4%.

Sterling dropped to a low of $1.145 in New York trading on Wednesday and has fallen more than 12% against a strengthening dollar over more than a week of volatile trading.

Pound v US dollar

The pound has not been this weak since 1985, when the Plaza Accord was signed by the world’s richest nations to weaken the dollar and drag the US economy out of recession.

Against the euro on Thursday, the pound was trading higher, up around 1% at 1.0697 euros.



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