The latest move by the central banks will help to “lessen strains in global US dollar funding markets”.
The RBA and the Fed will establish a “temporary reciprocal currency arrangement” for the provision of US dollar liquidity.
“The Reserve Bank of Australia and the Federal Reserve will establish a US$60 billion swap line to provide US dollars in exchange for Australian dollars,” the RBA said in a statement.
“The US dollars will be made available to local market participants by the Reserve Bank in US dollar repurchase agreements (repos) against Australian dollar-denominated securities. The US dollar repos will be allocated through an auction process.”
The Fed will also establish temporary arrangements with the Banco Central do Brasil, the Danmarks Nationalbank, the Bank of Korea, the Banco de Mexico, the Norges Bank, the Reserve Bank of New Zealand, the Monetary Authority of Singapore and the Sveriges Riksbank.