Global liquidity
How central bank balance sheets and dollar funding move every market at once.
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Lessons
- 01What is global liquidity?Global liquidity is how easy it is to borrow and move money across the world's financial system. It comes from central banks and from private lenders such as banks and bond markets. Because so much borrowing is in US dollars, looser liquidity tends to soften the dollar and tighter liquidity tends to lift it.
- 02Dollar funding and market stress.Much of the world borrows and trades in US dollars. When markets panic, lenders pull back and borrowers outside the United States rush to buy dollars to repay debts. That rush often lifts the dollar against most currencies, even when the trouble starts in the US, and the Federal Reserve can ease it by lending dollars abroad through swap lines.