Central banks in Asia were watching markets closely and giving some comfort to jittery investors. The Bank of Japan and the Reserve Bank of Australia pumped cash into the banking system to help ease credit concerns over the liquidity crunch.
Monday's cash injections follow moves by the European Central Bank and the U.S. Federal Reserve last week. The Fed said on Friday it would provide cash as needed to ensure U.S. markets functioned smoothly. It was the U.S. central bank's first such statement since the Sept. 11, 2001 terror attacks.
The BOJ offered 600 billion yen ($5.1 billion) of funds Monday to the banking system in a one-week operation starting later this session as the central bank aims to cool tighter conditions in the money market.
"We are supplying the funds for a week to settle next Monday as we see a slight upward pressure on rates beyond the overnight call rate," a Bank of Japan official told Reuters, adding that it was part of its regular tenders.
On Friday the BOJ supplied 1 trillion yen in overnight funds as a squeeze in U.S. and European money markets spilled into the Japanese call market.
The RBA injected A$1.52 billion (US$1.28 billion) into financial markets through repurchase agreements, against estimated daily system deficit of A$2.22 billion. the relatively modest injection indicates a possible easing of concerns at the RBA about the global liquidity squeeze impacting Australia.
South Korea said it would take swift steps, such as supplying emergency funds, if a credit crunch arises amid fears that problems with the U.S. subprime mortgage sector were spreading.
South Korean banks and insurance firms have invested a combined $850 million in the U.S. subprime mortgage loan sector but were capable of dealing with any losses from the investments, Vice Finance Minister Kim Seok-dong told reporters.
"(The authorities) will supply funds through the liquidity control lending process or through repurchase agreement deals right away in case a credit crunch is feared or anticipated," Kim said of the Bank of Korea's open market operation tools.
Kim spoke after a meeting between senior officials from the Finance Ministry, the central bank and the financial regulatory agency over the subprime mortgage crisis.
It was a follow-up to an emergency gathering of policy officials on Friday, as local financial markets were on a rollercoaster ride, along with other markets around the world, due to fears the U.S. subprime mortgage crisis was spreading.
The Bank of Korea pledged on Friday to inject cash when needed, but South Korean money markets have remained calm so far in contrast to turmoil in the United States, Europe and Japan, where central banks have had to inject emergency funds.