(Adds details, market reaction, background)
WASHINGTON, March 20 (Reuters) - The U.S. Federal Reserve said on Friday that it would enhance the U.S. dollar liquidity swap line arrangements it has with several major central banks.
The Fed said that it would increase the frequency of 7-day maturity operations from weekly to daily, starting on March 23, as part of its swap line arrangements with the Bank of Canada, Bank of England, Bank of Japan, European Central Bank and Swiss National Bank.
Those operations will continue at least through the end of April and the central banks will also continue to hold weekly 84-day maturity operations, the U.S. central bank said.
“The swap lines among these central banks are available standing facilities and serve as an important liquidity backstop to ease strains in global funding markets,” the Fed said in a statement.
Following the announcement, the dollar index, which tracks the greenback against a basket of major trading partner currencies - including those from the other participating central banks - weakened about 0.4%, led by a nearly 0.5% gain in the euro.
The Fed has permanent swap arrangements with those central banks and on Thursday extended swap line provisions temporarily to central banks in nine additional countries to ease access to dollars in hopes of stemming the accelerating financial and economic fallout from the coronavirus pandemic.
Dollars have been in huge demand - and tight supply - in markets outside U.S. borders as banks, companies and governments scramble to secure them to service the dollar-denominated debts many have accumulated.
The Fed has announced near daily emergency moves since it announced a package of measures on Sunday that included slashing interest rates near zero and pledging hundreds of billions of dollars in asset purchases, along with backstopping foreign authorities with the offer of cheap dollar financing. (Reporting by Lindsay Dunsmuir; Editing by Chizu Nomiyama and Andrea Ricci)