Stocks surged after major central banks around the world took coordinated action on Wednesday to reduce the strain on the world's financial system, making it easier for banks to get dollars if needed, the Washington Post reported.
The European Central Bank, the US Federal Reserve, the Bank of England, and the central banks of Canada, Japan and Switzerland are participating in the move, which reduces the cost of the temporary dollar loans they offer to banks by half a percentage point, starting Monday, NPR reported.
The move comes as Europe's debt crisis spreads, and the global financial system shows signs of entering another credit crunch like the one that followed the 2008 collapse of Lehman Brothers, a US investment bank, the Washington Post reported.
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According to a joint statement by the banks:
“The purpose of these actions is to ease strains in financial markets and thereby mitigate the effects of such strains on the supply of credit to households and businesses and so help foster economic activity."
Stock markets and the euro rose sharply on the news. The dollar is the leading currency for central bank reserves.
According to Reuters, the Dow Jones industrial average gained 400 points, the Standard & Poor's 500 Index gained 32.52 points, and the Nasdaq Composite Index gained 70.07 points.
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