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Swap arrangements


Short-term reciprocal lines of credit between the Federal Reserve and 14 foreign central banks as well as the Bank for International Settlements. Through a swap transaction, the Federal Reserve can, in effect, borrow foreign currency in order to purchase dollars in the foreign exchange market. In doing so, the demand for dollars is increased and the dollar's foreign exchange value is increased. Similarly, the Federal Reserve can temporarily provide dollars to foreign central banks through swap arrangements."


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