The Bank of Canada is among six central banks that have agreed to lower the cost of U.S. dollar liquidity swaps, in hopes of spurring economic activity and making it easier for private banks to dole out credit.
The central banks of England, Japan, the European Union, Switzerland and the U.S. are doing the same thing, as part of a co-ordinated effort that was announced Wednesday.
"The purpose of these actions is to ease strains in financial markets and thereby mitigate the effect of such strains on the supply of credit to households and businesses and so help foster economic activity," the banks said in a joint statement.
As of Monday, the six central banks will reduce the cost of U.S. dollar liquidity swaps -- the temporary dollar loans used by banks -- by half a percentage point.
And they will also establish temporary swap lines, allowing the banks to obtain money in non-U.S. currencies if needed.
The Canadian dollar jumped more than a cent after the announcement to 98.15 cents US, while the euro surged one per cent.
Stock markets in Germany, France and New York also saw gains after the news from the six central banks.
With files from The Associated Press and The Canadian Press
