On Aug 13, 2007, at 11:33 AM, uvj at vsnl.com wrote:
> China on Sunday delivered a vote of confidence in the
> dollar, saying dollar assets form an important part of its foreign
> exchange
> reserves and the U.S. currency plays a prominent role in the global
> monetary
> system.
"Important" seems like a mild word in what purports to be a reassurance. As does "prominent." But the markets don't act nervous. In fact they look to be recovering their composure, and the CBs are coming in with only "modest" amounts of cash today. Of course there could be a relapse, but things seem to be calming down. Overnight policy rates (like fed funds) are back at their targets.
Doug
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Central banks add money for 3rd day but calmer mkts Mon Aug 13, 2007 10:59AM EDT By Krista Hughes and Jan Dahinten
FRANKFURT/SINGAPORE, Aug 13 (Reuters) - Central banks in the world's leading economies pumped money for a third day into the financial system on Monday, but in smaller amounts as investor nerves steadied over the dangers of a credit squeeze.
The European Central Bank lent out an extra 47.67 billion euros ($65.29 billion) in overnight funds, its smallest amount since lending rates shot up last Thursday on fears European banks faced huge exposure to risky U.S. mortgage debt. The ECB noted that markets were beginning to return to normal.
Certainly the ECB borrowing rate was back to the central bank's benchmark level and stock markets were rallying.
The ECB action followed a $5.1 billion injection in one-week funds by the Bank of Japan and promises by Asian central banks to follow suit if needed, helping to support stocks in Asia and Europe.
The U.S. Federal Reserve also topped up its market with $2 billion in extra cash on Monday. That was far less than banks requested and way below the $38 billion injected on Friday, the largest amount for any single day since Sept. 19, 2001.
The Bank of Canada followed suit and reduced its injection, adding C $670 million, or $638 million in U.S. dollars, down from C$1.685 billion on Friday.