The Bank of Japan offered to supply $1.475 billion at a regular dollar funding operation on Tuesday after global financial markets plunged in the wake of the U.K.’s referendum to leave the European Union.
The funding covers the period from June 30 to July 8 and was the biggest amount accepted since the end of December 2014, when $1.528 billion was supplied. Demand at the BOJ’s dollar funding operations tends to strengthen toward the end of the quarter. The amount accepted at an operation covering the end of June last year was $520 million.
“It’s a bit larger than expected,” said Kenji Sato, a manager at the planning and research department of Central Tanshi Co., a Tokyo-based money-market dealer and broker. “The volume reflected the rising cost of funding related to the Brexit effect and may also include preventive funding procurement going over the quarter. I don’t get the impression that there’s difficulty tapping markets for funds.”
Cross-currency basis swap spreads showed the cost to borrow dollars in exchange for yen reached 68 basis points on Friday, the highest since November 2011.
Bank of Japan Governor Haruhiko Kuroda and Finance Minister Taro Aso said last week that central banks of six major developed nations have currency-swap lines ready to provide liquidity following the Brexit results.