UPDATE 1-BOJ chief says dlr liquidity all but dried up

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http://www.reuters.com/article/usDollarRpt/idUSLT67124520080929

Fed Throws in $620 Billion In Swaps For Dollar Liquidity
http://www.247wallst.com/2008/09/fed-throws-in-6.html

TOKYO, Sept 29 (Reuters) - Bank of Japan Governor Masaaki Shirakawa said on Monday the central bank would double offers of 3-month dollars to the money markets to $20 billion and said dollar liquidity around the world had all but dried up.

"Credit risk has risen and banks have become extremely cautious about lending for longer term and we think that dollar liquidity has almost dried up," Shirakawa told a news conference.

He warned pressure on term-funding has risen globally and said bank failures in the West were likely to cause lasting tension in the financial markets.

"Tension in the dollar market is now more likely than before to affect yen money markets," said Shirakawa.

As part of coordinated action among central banks to boost dollar liquidity in markets, the BOJ said it would increase the maximum aggregate amount of the U.S. dollar swaps facility with the U.S. Federal Reserve to $120 billion from $60 billion. (Reporting by Hideyuki Sano; Editing by Andy Bruce)

To prevent the dollar from gaining strength over other currencies the central banks need to inflate the global dollar liquidity. They will keep creating dollars and injecting them into the global market to prevent the dollar supply from drying up. If they didn't those who don't know (most people) how money is created would notice the correlation in between debt and the money supply.