The Bank of Japan is one of the six global DM central banks that swooped into action on Sunday with a pledge to supply US dollars daily to a stressed, troubled banking system. That news:
- the Federal Reserve, European Central Bank, Bank of Japan, Bank of England, Swiss National Bank, and Bank of Canada will switch from weekly to daily auctions for US dollars through FX swap lines. This move will make US dollar liquidity more readily available, should it be needed. This change has been been made before during crises, the GFC, for example. Most recently it was used in the early stage of the pandemic in March 2020. The change is a clear sign global authorities are very concerned about contagion risk from the bank failures in the US and Switzerland. The Sunday move is seen as getting ahead of any potential surge in contagion liquidity demand.
The but is ... the BOJ announced (again) today that there were zero bids for dollars.
