Federal Reserve Foreign Exchange Swap Agreements
In general, these swaps are two transactions. When a foreign central bank uses its swap line with the Federal Reserve, the foreign central bank sells a certain amount of its currency to the Federal Reserve in exchange for the dollar at the dominant exchange rate. The Federal Reserve holds the foreign currency in an account with the foreign central bank. Dollars provided by the Federal Reserve are deposited into an account managed by the Foreign Central Bank with the Federal Reserve Bank of New York. At the same time, the Federal Reserve and the foreign central bank reach a binding agreement for a second transaction that requires the foreign central bank to buy back its currency at a given future date at the same exchange rate. The second transaction triggers the first. At the end of the second transaction, the foreign central bank will pay interest at a market rate to the Federal Reserve. Dollar liquidity swaps have maturities ranging from overnight to three months. Since 2009, China has signed bilateral currency exchange agreements with 32 counterparties. The stated intention of these swaps is to support trade and investment and to promote the international use of the renminbi. Overall, China limits the amount of renminbi available for trading redemption and swaps were used to obtain the renminbi after these limit values were reached.
 Many foreign companies and institutions also borrow in dollars, and economists fear that a sudden halt in the flow of money to foreign economies will lead them to be unable to refinance their debt or obtain new loans. As of April 2009[update], swap lines have been approved with the following institutions: reserve Bank of Australia, Banco Central do Brasil, Bank of Canada, Danmarks Nationalbank, Bank of England, European Central Bank, Bank of Japan, Bank of Korea, Banco de Mexico, Reserve Bank of New Zealand, Norges Bank , the Monetary Authority of Singapore, Sveriges Riksbank and swiss Bank. The FOMC approved these liquidity swap lines until October 30, 2009. In November 2011, swap contracts were renewed until February 2013 at lower interest rates.  Avatars of later lines of sweatshirts first appeared between 1880 and 1920, when central banks traded gold reserves if necessary; But the first effective swea-currency lines (between eight central banks) were created in the 1960s: they were activated and used by three jurisdictions, the Bank of England, the Bank of Canada and the United States.  Swap lines were briefly reintroduced after the 11th, but did not gain global importance until the beginning of the credit crunch.  Central bank swap lines keep the global financial system active by providing the credit it needs for day-to-day operations. Without this credit, grocery stores would not be able to pay truckers to provide food. Gas station owners would not be able to order new tanks to fill the tanks that go dry. Your employer would ask you to work without pay this week. Swap lines are agreements between central banks to exchange their country`s currencies.
They hold a foreign exchange offer for trade with the other central bank at the current exchange rate. U.S. dollar liquidity swap transactions — by country When a foreign central bank uses its swap line to finance its dollar bidding operations, it pays interest to the Federal Reserve on the amount of interest the Foreign Central Bank earns on its tenders.