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Central Banks Inject Liquidity

After months of delay and perhaps overly wishful thinking regarding the global credit crunch, the world's Central Banks are finally ready to take action.

America's Federal Reserve Bank will join forces with the Bank of Canada, the Bank of England, the European Central Bank and the Swiss National Bank as part of a concerted effort to introduce greater liquidity into global capital markets.

Under the plan, the Banks will auction off tens of billions of Dollars worth of bonds denominated in their respective currencies, and lend the proceeds to commercial banks. The goal of the plan is to to limit growing risk aversion, which has caused banks to significantly rein in lending.

Further, while the move is designed primarily to boost confidence in equity markets, certain sectors of forex may also receive a bump. High-yielding currencies such as the New Zealand Kiwi and Australian Dollar, which have been shunned in recent months, seem to be the most likely beneficiaries.

Read more at Forbes.com

This is good news for collerated pairs hedge traders and carrys tarders or the whole global economy. But until then, carry pairs are still in bearish bias until rumour is digested.

1 comments:

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