New York hospitals 'dealing with a war'. Global cases approach 800,000. Scientists develop promising testing method.

The U.S. Federal Reserve building in Washington, on March 23.
The U.S. Federal Reserve building in Washington, on March 23. Liu Jie/Xinhua/Getty Images

The Federal Reserve is opening up another avenue for stressed-out foreign central banks to get access to US dollars during the coronavirus crisis.

The new emergency program, announced today, is part of the Fed’s sweeping efforts to keep credit flowing to American businesses and households despite the severe economic shock inflicted by the pandemic.

The US central bank said the new temporary repurchase agreement (repo) facility will let foreign central banks swap US Treasuries for US dollars. Those greenbacks can then be transferred to local banks in need of cash.

The Fed said the new program, set to launch April 6, would mostly be used “only in unusual circumstances such as those prevailing at present.”

The goal is to lower the need for foreign central banks to dump US Treasuries in fire sales, which can disrupt markets and cause yields to rise. And that in turn lifts borrowing costs on everything from mortgages to credit cards.

Demand for the US dollar, the world’s preeminent currency, has spiked during the crisis.

In response, the Fed promised to provide cheap dollars to foreign central banks through liquidity swap lines. The Fed expanded that facility to Australia, Brazil and Mexico.