Fed sets $30 billion swaps lines to ease credit strains

WASHINGTON (Reuters) - The U.S. Federal Reserve said on Wednesday that it had set up $30 billion worth of new currency swaps with central banks in Australia and Scandinavia, marking its latest bid to ease global credit market strains.

The action comes on top of $247 billion that has already been committed to currency swaps with other major central banks, as authorities battle a global credit crunch sparked by the collapse of the U.S. subprime mortgage market last year.

"These facilities, like those already in place with other central banks, are designed to improve liquidity conditions in global financial markets," the Fed said.

"Central banks continue to work together during this period of market stress and are prepared to take further steps as the need arises," it said in a statement.

The Fed said it had established temporary reciprocal currency swap lines of up to $10 billion each with the Reserve Bank of Australia and Sweden's Riksbank, and $5 billion swaps with Denmark's Nationalbank and Norway's Norges Bank.

It said the swaps were specifically aimed at addressing elevated pressures in U.S. dollar short-term funding markets.

Both central banks in Norway and Denmark said the swap line would boost their flexibility in money market operations, while the head of Sweden's authority said the move was precautionary.

"This agreement provides Norges Bank with additional flexibility to address, if needed, rapidly evolving developments in financial markets," the governor of Norway's central bank, Svein Gjedrem, said in a statement.

Swedish Riksbank Governor Stefan Ingves said his country's financial system was stable and its banks solvent.

"Sweden has been affected by the renewed wave of international financial unrest," he said. "We are following these developments closely and are working closely together with Swedish banks, market participants and government agencies."

The Reserve Bank of Australia didn't comment on the currency swaps other than to repeat the Fed statement on its website.

The Fed has already set up a $110 billion swap line with the European Central Bank, $60 billion with the Bank of Japan, $40 billion with the Bank of England, $27 billion with the Swiss National Bank, and $10 billion with the Bank of Canada.

The swaps have been authorized until January 20, 2009, the Fed said.

(Reporting by Alister Bull; Editing by Leslie Adler and Neil Fullick)