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In another effort to ward off the negative implications of the coronavirus (COVID-19), the US Federal Reserve announced that it will offer helps to primary dealers via short-term loans.

Key quotes

Will open primary dealer credit facility beginning March 20 and lasting at least 6 months for 90-day loans.

Will offer collateralized loans to primary dealers.

Acceptable collateral includes commercial paper, municipal bonds, investment-grade corporate debt and equity instruments such as stocks, ETFs. mutual funds.

The interest rate will be at the primary credit (or discount window) rate.

FX implications

While the news should ideally add to the market’s risk-positive sentiment, USD/JPY drops from 107.70 to 107.50 after the news release. Investors will wait for further details to confirm the bullish bias portrayed the previous day.