Fed reaches $13B deal

The U.S. central bank expands currency deals with the European Central Bank and the Swiss National Bank in effort to increase dollar liquidity.

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WASHINGTON (CNN) -- The U.S. Federal Reserve Bank announced an expansion of deals with European nations Friday in an effort to stabilize global financial markets.

The Fed said it is boosting reciprocal-currency arrangements with the European Central Bank and the Swiss National Bank by $13 billion.

The agreement allows the Fed to make another $13 billion available to the two central banks. In return, the Fed will receive the reciprocal amount of foreign currency from each country. Under these types of arrangements, the currency 'swaps' get unwound at a later date.

The U.S. central bank's move to increase liquidity by reaching out to other countries is part of a larger effort to restore some level of confidence to Wall Street.

The Fed's announcement, made at 2 a.m. ET Friday, follows a similar initiative originallyunveiled last week and expanded several times since.

The reciprocal currency arrangements with the European Central Bank, and the central banks of Switzerland, England, Canada, Japan, Australia, Denmark and Sweden now totals $290 billion.

The influx of money from the central banks represents an effort to put more money into financial markets and fuel economic activity.

In the current economic climate, with major financial and insurance institutions teetering, commercial banks have tightened their lending policies and increased interest rates, taking billions of dollars out of the economy.

The program has been authorized by the Fed through January 30, 2009. To top of page

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