The United States Federal Reserve central bank will supply a $US15 billion ($NZ26.6 billion) facility to the Reserve Bank of New Zealand to ensure the availability of US dollars here, in another move to ease the credit crunch.
BNZ currency strategist Danica Hampton said while more details on how the facility would work were yet to be released, the Fed's offer should be taken as an "encouraging sign" by investors, but it was unlikely to be used a lot in New Zealand because most banks lent in New Zealand dollars.
"This [agreement] has bought us in line with the rest of the world as the Fed wants to ensure the financial system globally continues," she said.
Local banks would be able to borrow from the facility in US dollars for lending to New Zealand customers.
In what Ms Hampton described as a "bold move", similar agreements have been struck with central banks around the world, including the Bank of England, Swiss, Australian, Canadian and Japanese central banks.
Reserve Bank deputy governor Grant Spencer said the establishment of a temporary reciprocal currency arrangement, or swap line, was to address "ongoing elevated pressures in US dollar short-term funding markets".
"While there is no need to use the facility right now, it is useful to have this capacity if markets become dysfunctional," Mr Spencer said in a statement yesterday.
Ms Hampton described the offer as "a positive step".
The currency arrangement is in place until April 2009.
