? about: Fed adds reserves via 5-day system repurchases

Hi All

I read the Currency News Archive at Yahoo and every few days the following type of notice is posted. I was wondering if someone could explain the significance of this type of FR activity. In particular the paragraph hilighted in blue.

Thank You
NEW YORK, Dec 23 (Reuters) - The Federal Reserve said on Friday it had added temporary reserves to the U.S. banking system through five-day system repurchase agreements. The benchmark federal funds rate last traded at 4.25 percent, the Fed's current target for the overnight lending rate.

Further details of the operation are available at: http://www.ny.frb.org/markets/omo/dmm/temp.cfm


At the link the info is:


To implement monetary policy, short-term repurchase and reverse repurchase agreements are used to temporarily affect the size of the Federal Reserve System's portfolio and influence day-to-day trading in the federal funds market.

Temporary Open Market Operations
http://www.ny.frb.org/images/spacer.gif Temporary Open Market Operations for December 23, 2005
Last Updated: December 23, 2005 9:53 AM
Number of Operations Today: 1

http://www.ny.frb.org/images/spacer.gif Deal Date: Friday, December 23, 2005
Delivery Date: Friday, December 23, 2005
Maturity Date: Wednesday, December 28, 2005
Type of Operation1: Repo
Settlement: Same Day
Term of Operation2: 5 Days
Operation Close Time: 09:30 AM

The Fed makes small adjustments to the money supply, and also overnight interest rates, all the time with this kind of activity. When they buy securities, they are putting money in to the system. When they sell, they're taking it out.

A repurchase agreement (REPO) just means that the trade will be reversed in a fixed time period (5 days in the example).

These sorts of things are more in the realm of the very short-term interest rate market player. Nothing to worry about for forex.