Fed Expands Swap Agreements

Sept. 29 (Bloomberg) -- The Federal Reserve increased the size of previously arranged currency swaps with foreign central banks to $620 billion from $290 billion to make more dollars available to banks worldwide.
Banks and brokers have slowed lending as they struggle to restore their capital after $554 billion in credit losses and writedowns since the mortgage crisis began a year ago. The bankruptcy of Lehman Brothers also sparked fears among banks they wouldn't be repaid by counterparties, driving up the cost of short-term loans between banks.
``These steps are being undertaken to mitigate pressures evident in the term funding markets both in the United States and abroad,'' the Federal Reserve said in a statement released on the Board of Governors website.
``By committing to provide a very large quantity of term funding, the Federal Reserve actions should reassure financial market participants that financing will be available against good collateral, lessening concerns about funding and rollover risk,'' the central bank said.

Currency swap from Wikipedia:

A currency swap (or cross currency swap) is a foreign exchange agreement between two parties to exchange a given amount of one currency for another and, after a specified period of time, to give back the original amounts swapped.

Structure

Currency swaps can be negotiated for a variety of maturities of up to 30 years. Unlike a back-to-back loan, a currency swap is not considered to be a loan by United States accounting laws and thus it is not reflected on a company's balance sheet. A swap is considered to be a foreign exchange transaction (short leg) plus an obligation to close the swap (far leg) being a forward contract.
Unlike interest rate swaps, currency swaps involve the exchange of the principal amount. Interest payments are not netted (as they are in interest rate swaps) because they are denominated in different currencies. Further, many currency swaps are traded on organized exchanges - lowering counter-party risk, as evidenced by the bid-ask spread on most listings. See also John Hull.

Uses

Currency swaps are often combined with interest rate swaps. For example, one company would seek to swap a cash flow for their fixed rate debt denominated in US dollars for a floating-rate debt denominated in Euro. This is especially common in Europe where companies shop for the cheapest debt regardless of its denomination and then seek to exchange it for the debt in desired currency.
For example, suppose a U.S.-based company needs to acquire Swiss francs and a Swiss-based company needs to acquire U.S. dollars. These two companies could arrange to swap currencies by establishing an interest rate, an agreed upon amount and a common maturity date for the exchange. Currency swap maturities are negotiable for at least ten years, making them a very flexible method of foreign exchange.
Currency swaps were originally done to get around exchange controls.

For the little that I can understand on fundies, is this how the Fed is trying to restore confidence in the market? I'm not one of those guys they care about restoring confidence, but a move like this to me sounds like the trouble are way bigger then expected. I will appreciate some comments and some thought on what effect this might have on our charts.

Another thought, if a central bank, like BCE, gives 1bn euro for 1.4bn$, with the deal that after a certain time the swap will be done back at the same value, for BCE to take it, would it mean that they expect the $ to loose value? otherwise, what would the reason be, if when they get back their euro their are worth less then before?