Federal Reserve and other central banks open credit line to send dollars to Europe

WASHINGTON (AP) — The Federal Reserve on Sunday opened a program to ship U.S. dollars to Europe in a move to head off a broader financial crisis on the continent.

Other central banks, including the Bank of Canada, the Bank of England, the European Central Bank and the Swiss National Bank, are also involved in the effort.

The action reopens a program put in place during the 2008 global financial crisis. Under the program, dollars are shipped overseas through the foreign central banks. In turn, these central banks can lend the dollars out to banks in their home countries that are in need of dollar funding to prevent the European crisis from spreading further.

The Fed said action is being taken "in response to the reemergence of strains in U.S. dollar short-term funding markets in Europe."

The debt crisis first erupted in Greece and there are fears that it could spread to Spain, Portugal and other European countries. The crisis has pushed up demand for the U.S. dollar and has weakened the value of the euro, the currency used by 16 European countries.

The Fed said the action was being taken to "prevent the spread of strains to other markets and financial centers."

The Bank of Japan will be considering similar action soon, the Fed said.

The so-called "swap" line with the Bank of Canada provides up to $30 billion. Figures weren't provided for the other central banks. The arrangements were authorized through January 2011.

The Fed had wound down these crisis-era programs with other central banks in February, along with other emergency programs to get lending flowing more freely again and return stability to financial markets.