Currency Swaps

So I was reading an article about currency swaps today on the Reuters website [1]. Basically it said that the Fed provided the ECB with $70M in currency swaps at 1.18% last week. In contrast, the EURO posted a 3.78% gain over the USD last week.

I understand that there are Global Maro-Economics are involved. Granted, $70M is a paltry amount, but it is the statement that this makes. The ECB buys EURO Sovereign debt last week and also uses the Fed for liquidity. And the Greenback drops.

If the FED, which is a quasi Federal institution can loan at microscopic amounts, it can put that $70M into a Portugal bond at %6 that will be backed by the ECB anyways. That in itself provides a little more bouncy to the Fed to keep buying US debt (public and private) at an ultra low rate.

Better yet, instead of loaning to private US corporations, how about purchasing investment grade state bonds. Yeah, I know that there are a lot of muni's and state bonds that "could" default, but if the Fed could drive down the rates investment grade state bonds, then that in turn may lower the rates of higher risk state and muni bonds.

If there is anyone that can shed some light, OTHER than the Fed is a Private corporation, please provide us with some insight. Thanks in advance.

- Emo