Charles Daniel T245_ Rivera#93

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What are currency swap lines between central banks and why are they crucial?

Swap lines are agreements where central banks exchange currencies to provide liquidity during crises. Example: the Fed’s dollar swap lines with ECB, BOJ, and others during 2008 and COVID-19 stabilized global dollar funding. Benefits: reduced panic, smoother global trade financing. Risks: political tensions if access is denied. For forex traders, swap lines explain sudden stabilization of currencies under stress. Retail traders can track announcements by Fed or ECB for signals of emergency support. Swap lines highlight that central banks are ultimate backstops in forex, ensuring systemic survival when markets strain.