Swaps between central banks advance amid the crisis, but can create dependence
The Council on Foreign Relations' tracker maps new bilateral swap lines, which gain strength after economic and geopolitical shocks and require caution.
BY THE X-TRADER NEWS NEWSROOM · REPORTING FROM INFOMONEY · 2 MIN
Currency swaps between central banks return to the center of the debate over global financial security. According to InfoMoney, countries in several regions are creating new bilateral lines of this type, at a time when recent economic and geopolitical shocks are reshaping the global financial protection network.
A currency swap is an agreement between central banks to exchange currencies and guarantee liquidity. To monitor this movement, the think tank Council on Foreign Relations (CFR) created a tracker of these operations, reports InfoMoney.
The same survey points out the other side of the tool: in some cases, the use of swaps generates excessive dependence. The point of attention is there. A mechanism designed to help in times of need can, when used beyond the account, leave the borrowing country tied to the institution that provides the currency.
Recent memory shows why liquidity matters. According to InfoMoney, the Fed (USA) and ECB (Euro Zone) played a relevant role in the liquidity shortage during the 2007-2008 financial crisis.
The pattern was repeated at the beginning of the Covid-19 pandemic, in 2020, when the two central banks also acted on the shortage of liquidity, according to the same report.
In the center-right reading that guides this essay, the central question is not just whether swaps work, but how much a country gives up in autonomy when it depends on an external aid network. More liquidity in a crisis is positive, as long as it does not replace the fiscal and monetary discipline that sustains confidence in the currency.
What changes for the investor
For those who operate interest rates, the dollar, Nasdaq and the stock market, the theme works as a thermometer. Broader swap networks can reduce the intensity of financing crises, while dependence on external bailouts signals fragility that deserves monitoring. It is worth monitoring new lines announced, signs of higher-than-expected usage and the actions of the Fed and ECB in stress scenarios. These factors help read risk, but do not indicate price direction.
Automatically translated from Portuguese.
