Wellington, Oct 29 NZPA - The United States Federal Reserve and the Reserve Bank of New Zealand today announced the establishment of a temporary reciprocal currency arrangement (swap line) to address elevated pressures in US dollar short-term funding markets.

The Federal Open Market Committee has approved the Reserve Bank's request for a swap facility that will support the provision of US dollar liquidity to the New Zealand markets in amounts of up to US$15 ($NZ27.94) billion.

This reciprocal currency arrangement has been authorised through to April 30 2009, although the Reserve Bank says it does not need to use the fund right now.

Up to now help measures offered in the financial crisis have been in New Zealand dollars, but this will offer access to US dollars if needed.

Reserve Bank deputy governor Grant Spencer said the facility, like those already established between the Fed and other central banks, is to provide an additional source of liquidity for the US dollar funding market.

"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.

NZPA WGT dw nb