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Wednesday, 12 September, 2001, 00:23 GMT 01:23 UK
Central banks promise support
The US Federal Reserve
The Fed last offered banks support in the crash of 1987
Central banks around the world have said they are willing to provide cash to the banking system, in the hope of preventing financial instability in the wake of the US attacks.

The US Federal Reserve led the charge, saying that it was operating as normal, and that funds were available to shore up the banking sector.

The Fed was quickly followed by authorities in Japan and Switzerland.

Japanese Finance Minister Masajuro Shiokawa said the Bank of Japan was ready to step in if necessary.

"On currency markets, we will monitor movements closely, including smooth settlements.," he said in a statement.

"We will keep in close contact with related authorities and take appropriate steps if necessary."

The European Central Bank also said it was ready to step in with payments to support markets following the attacks.

"The Eurosystem stands ready to support the normal functioning of the markets," the ECB.

"In particular the Eurosystem will provide liquidity to the markets, if need be."

Meanwhile, the American Stock Exchange, the New York Stock Exchange and the Nasdaq, announced that they would remain closed throughout Wednesday.

US stocks listed on major European markets will also not be traded on Wednesday.


The main concern of central bankers is to reassure markets around the world, which have plunged in response to the attacks.

In the longer term, they also worry that the nervous mood might persuade financial institutions to cut off lending, choking economies around the world at a time when the outlook has already soured.

The last time the Fed made such a offer was in 1987, after the dramatic collapse of financial markets around the world on so-called "Black Monday".

Then, the promise served to steady jittery markets.

And some observers feel the attack means the Fed will have to cut interest rates once more, in order to reassure the public and the markets and help stave off recession.

"We are looking for a bold move from the Federal Reserve soon, probably before the 2 October FOMC (Federal Open Markets Committee) meeting," said Dana Saporta, economist at Stone & McCarthy Research Associates.

Fed chairman Alan Greenspan
Mr Greenspan is currently out of the country

The Fed was keen to stress that all its staff, including chairman Alan Greenspan, were safe and working as normal.

Mr Greenspan is currently out of the country, in Switzerland, for a regular meeting of central bankers.

The Swiss authorities could not confirm Mr Greenspan's precise location, but said his plane returning to the US turned round on hearing the news and flew to Zurich airport.

Mr Greenspan's deputy, Roger Ferguson, is monitoring banking and market developments along with a team of senior officials.

Working together

The support of Japan and Switzerland is crucial.

The US dollar is likely to weaken further and the euro will gain

BNP Paribas
The Swiss franc is traditionally a safe haven for investors at times of market panic, and the yen has also gained sharply against the dollar.

The assurance that Zurich and Tokyo are working in support of the Fed could help check any flood of funds out of the dollar.

A spokesman for French bank PNB Paribas said: "The US dollar is likely to weaken further and the euro will gain.

"The traditional safe haven of the Swiss Franc and sterling as well as the Australian dollar will benefit.

"The Australian dollar has been bought because of its benefits from its position 'down under'," the bank said in a statement.

"Yen strength will remain an issue and we expect and we expect that adequate action will be taken by Japanese authorities to weaken the currency."

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