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Friday, October 21, 2011

Swaps might be the reason for EUR strength




The above two charts from the FED shows who has drawn on the swap-line at the FED and by how much. As can be seen the only centralbank that used its swap-line during the week ending on October 19 was ECB. The ECB borrowed USD 1,353 for 84 days at 1,09% (By the way, this is far far above the 3 M US Libor, which comes in around 0,4155%). I have no idea, which banks is the receiver of these USD, but they will take these USD to the market and swap them to EUR for the periode and this might be one of the reasons the EUR hasn't weakened more than it has during the last week.

Remember, that in mid-January this USD will have to be paid back to the FED., which will add pressure on the EUR and strengthen the USD.

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